Sports brand Nike exceeded all expectations in its latest quarter: especially in China, the sports manufacturer sold significantly more, pushing its share price to a record height.
Nike defies analysts
In the past quarter, which Nike calls the first quarter of its fiscal year 2020, earnings per share amounted to 0.86 dollars (just under 0.80 euros), while analysts had predicted 0.70 dollars. Last year’s net profit was 0.67 dollars per share or 1.09 billion dollars (one billion euros) in total, 25 % lower than they are now.
Sales amounted to 10.66 billion dollars (9.7 billion euros), 7.2 % more than a year earlier and better than the expected 10.44 billion dollars (9.5 billion euros). This was due to growth in shoe sales (+ 11 %), improved sales of sports equipment (+ 11 %) and clothing sales (+ 9 %). Sneaker brand Converse sold 8 % more.
China and women
In North America, sales increased by 4 %, but especially China is a major source of growth, with a 27 % increase in turnover. Despite the Chinese-American trade war, the sports manufacturer managed to double its presence there over the past year.
E-commerce is also an important area for growth: CEO Mark Parker informs CNBC that online sales went up by no less than 42 %. Nike also wants to focus more on female consumers and saw double-digit growth in that segment. For the brand, this year was the best back to school season ever, with unprecedentedly high sales of children’s shoes.
In control of prices
According to Parker, the growth in profit was therefore mainly owed to the increase in turnover in combination with an improved gross margin. This rose by 150 basis points to 45.7 %, as Nike was able to sell more products at full price. After all, the brand chose to sell more and more directly and to work less via wholesale customers or outlets, allowing the company to keep a tighter grip on prices.
Investors reacted enthusiastically to the news and immediately drove the share up by more than 5.5 %, which resulted in a record price for Nike after trading. For the current financial year, analysts expect a turnover of 42.09 billion dollars (38.2 billion euros) and a net profit of between 2.73 and 3 dollars (2.5 to 2.7 euros) per share. The company itself predicts an increase in turnover of between 5 and 9 %.