FILE PHOTO: The Nike swoosh logo is pictured on a store in New York City, New York, U.S., September 4, 2018. REUTERS/Carlo Allegri
September 25, 2018
(Reuters) – Nike Inc <NKE.N> beat Wall Street estimates for first-quarter profit on Tuesday, but a small rise in gross margins was not enough for some investors and analysts, who drove down shares of the sportswear giant by 3 percent after hours.
“I think where the market might be slightly disappointed is around the gross margins … it is slightly weaker than expected,” MainFirst Bank analyst John Guy said.
Nike gross margins rose 50 basis points to 44.2 percent in the reported quarter, in-line with average analysts’ estimate, according to Thomson Reuters I/B/E/S.
“The numbers are good, but they weren’t wow enough,” said Jeff Auxier, founder & portfolio manager, Auxier Asset Management.
The company’s demand creation expense, or costs related to advertising and promotion, rose 13 percent to $964 million in the reported quarter.
However, the company’s direct-to-consumer model helped sales in North America rise 6 percent, its second straight rise, showing signs of recovery after competition from rivals Adidas AG <ADSGn.DE> and Under Armour <UAA.N> eroded sales in three out of the last four quarters.
Revenue rose 9.7 percent to $9.95 billion, beating estimates of $9.94 billion.
The company’s net income rose to $1.09 billion, or 67 cents per share, in the first quarter ended Aug. 31, from $950 million, or 57 cents per share, a year earlier.
Analysts had expected the company to earn a profit of 63 cents per share.
(Reporting by Nivedita Balu in Bengaluru; Editing by Shounak Dasgupta)
