Nike Q3 Earnings: Shares Fall Despite Strong Quarter

+31.03%
Upside
94.18
Market
123
Trefis
NKE: Nike logo
NKE
Nike

In what was deemed to be a make or break quarter for the company, Nike (NYSE:NKE) performed exceedingly well, surpassing earnings expectations by a large margin. Despite facing tough competitive conditions and overall weak demand in the market, the company has managed to stand its own and produce strong results this time around. That said, the sports apparel giant missed marginally on sales, driving the stock down in after hours trading by just under 2%. Nike reported fiscal third-quarter net income of $1.14 billion, or $0.68 a share, on sales of $8.43 billion. Analysts expected earnings per share to come in around $0.53, on sales of about $8.47 billion.

Screen Shot 2017-03-22 at 2.03.07 PM

Revamping a Tried and Tested Method

Relevant Articles
  1. Down 19% In Last Twelve Months, Will Nike Stock Gain Following Q3 Results?
  2. Nike Stock Could Rise 70% If It Recovers To Pre-Inflation Shock Highs
  3. What To Expect From Nike’s Stock Post Q4 Results?
  4. What To Expect From Nike’s Stock Post Q3 Results?
  5. Nike’s Stock Down 13% Over Last Year. What’s Next?
  6. Company Of The Day: Nike

Nike has always been a leader in sports apparel innovation and consumer experience. However, over the next few quarters, the company is changing things up a bit. In the earnings call, CEO Mark Parker laid out three important strategies for future growth, in what he dubbed the “triple double.”  Essentially, the management has made it clear that aligning all its firepower against the consumer experience is the key to long term growth. To meet consumers rising expectations, the company is driving core changes in three fundamental areas of the business: innovation, supply chain, and direct interaction with customers.

Basically, the company hopes to double its momentum and scale of innovation through performance and sports style, double the speed from product insight to delivery in the market place, and double its direct connections with consumers through digital membership and personalization. We will highlight the details of these strategies in a future article.

DTC Continues to Play an Integral Role

In the quarter, Nike brand DTC revenues increased by about 13%, driven primarily by an 18% growth in digital commerce and new store expansion. With continued growth cited in DTC over the last few quarters, the company has decided to employ certain strategies to maintain this momentum into the long term, as mentioned before. It is, now more than ever, committed to increasing the customer experience through enhanced digital commerce and membership, and specialty stores.

In this respect, the sportswear giant opened massive stores in New York City’s prime Soho neighborhood and in Miami over the last two quarters. These stores have since generated considerable buzz and pushed strong traffic growth. In January, the company opened a Nike and Jordan store in Beijing and is seeing a similar success there. In the coming quarters, Nike hopes to open more such stores in key markets across the world.

Apart from selling merchandise, these stores sell consumers the complete Nike experience. It allows consumers to get product trials with experts, elevated personalized experiences, and heightened member engagement, all the while seamlessly combining digital and physical retailing. These stores offer a powerful look at what Nike believes is the future of retailing, and something that can drive growth in the long term.

 

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research