Research archive for NKE

After the market closed in the US last night Nike, one of our favourite aspirational consumer stocks reported first quarter earnings which again disappointed the market. Revenues were up 10% to $6.7bn while earnings per share were down 10% to $1.23 beating estimates of $1.13. Earnings decreased from last year because of a decrease in margins, higher selling costs and an increase in the tax rate. Future orders were up 6% which was less than expected, this is why the stock is down premarket. Inventories increased 10%.

They really are brutal when it comes to earnings misses in the US. They don't have a trading update system like we do here but I guess they do release results quarterly compared to our 6 month releases. But any surprise normally brings big share price movements be it up or down. After hours yesterday Nike released Q4 results which actually looked good but missed expectations. The stock was down 12% in after market trade. Ouch. Let's delve into the numbers.

Nike delivered their third quarter earnings after the race bell last evening. It was a beat which is all the street really seems to care about I guess, EPS for the quarter clocked 1.20 Dollars versus the streets estimates of around 1.17 Dollars. So a comfortable beat. As much as I care about whether they managed to do better than the analyst community thought they would, I also don't get too excited about that specifically, the pitfalls of contracting quarteritis skew what you are trying to achieve. And what we as investors are trying to achieve is buying quality companies in a sector that we like. Nike happens to fall into an investing theme that we like, aspirational consumerism. Or soft luxury in this case, on the local front we like Richemont, which is at the other end of the spectrum.

Then Nike unveiled a product called the Nike+ FuelBand which tracks ones activities using Nikefuel scores (a measurement of activity created by Nike). The band can connect wirelessly to your iPhone which will then process all the information of your activities. It sounds quite similar to the Nike+ app which connected to your shoe but probably a little more sophisticated yet easier to use.

Last night we had numbers in the US from what has turned out to be a very resilient company in times where the consumer is supposed to be broken. I'm talking about Nike, pretty sure you have heard of them. They came out with Q1 results which comfortably beat expectations, managing to grow sales in all their regions except for Western Europe.

Nike shoes reported numbers last evening, and unlike last time it was a handsome beat. A fairly handsome beat, the stock was up over four percent in the aftermarket and crested 85 Dollars a share, and stayed there, currently 85.27 Dollars. Up 4.47 percent. OK, so obviously Mr. Market telling us that they like it. 124 US cents of earnings for the quarter, which was around 8 cents better than where the street pegged the number. On the Nike investors relations website they are at pains to point out that they are a growth company. I know that. But if you are stuck in America and the consumer is this and that, then you can be forgiven for feeling a bit beat up.

Nike reported afterhours Thursday, we ran out of time Friday to have a proper look. Sadly the numbers clearly disappointed the market. A few things here, first an earnings miss of 4 cents to 1.08 USD per share for the quarter. And then an inventory rise, by 18 percent to 2.5 billion USD. The second part was seen as a poor showing. So even if the company gets really excited about a record quarter, the rising inventory and earnings miss is a little troubling. But let us not get quarteritis, and flip flop from one quarter to the next.