What's going on?
‘Twas the week before Christmas, when all through the house, a sportswear giant was reporting… better-than-expected quarterly earnings. And investors heard it exclaim, ere it drove out of sight: “Merry Christmas to all, and to all a good Nike!”
What does this mean?
Last quarter, Nike’s (yes, we know) total revenue was up 10% and its profit up 35% from the same time last year. That was partly thanks to limited edition Air Jordan sneakers which propelled the brand to over $1 billion worth of sales for the first time.
But in North America, where Nike makes 40% of its revenue, its growth actually fell short of expectations. Tariff-influenced higher product prices could’ve been to blame, but investors might also be worried about competition from the likes of Adidas. That could explain its stock’s slight fall late last week, even though Nike now expects its annual revenue growth to be higher than forecast.
Why should I care?
For markets: A thirteen-year run ends.
Nike’s recently courted controversy with divisive ads and the reveal of women’s mistreatment at its now-shuttered training center. But you wouldn’t know it: the company’s stock has risen some 700% versus the US stock market’s 125% in the thirteen years under its outgoing CEO (tweet this). Nike’s investors will hope the incoming CEO can bring about another big upswoosh in value. And there’s no reason he won’t be able to just do it: his background leading eBay should certainly help Nike’s already-impressive ecommerce business, which grew 38% last quarter.
The bigger picture: Ready… set… sell!
This decade was dominated by China’s rise as a global superpower. So Nike’s next decade will likely rely on convincing the country’s increasingly well-to-do consumers to spend more on sports and athleisure products. It’s already made headway: Nike’s Chinese sales last quarter were over 20% higher than the same time last year, despite the twin disruptions of civil unrest in Hong Kong and an ongoing – though now simmering – trade war.