Nike is riding into the holidays on a high note.
The athletic giant today reported stellar earnings for the second quarter of its fiscal year, including revenues of $9.4 billion and diluted earnings per share of 52 cents. This easily topped the consensus estimates of $9.17 billion and 46 cents. Sales increased 14 percent year-over-year on a currency-neutral basis, well above the 7.2 percent forecast by Wall Street.
On a call with analysts and investors, Nike CEO Mark Parker pointed to the women’s footwear category as a high point for the quarter, with sales up 20 percent year-over-year for the three months ended November 30. “There’s incredible momentum for women in sport right now as athletes elite and everyday create a movement of health and wellness while driving a strong appetite for athletic footwear and apparel,” he said.
The Sage Air Force 1 is “emerging as her favorite franchise, owning the number one spot on Nike.com for five weeks running,” he said. Nike also has the top 3 selling women’s athletic footwear styles above $125: the Air Max 270, Vapormax, and Epic React. Parker credited the company’s “edit and amplify” strategy — offering fewer styles but more color and material choices — as a factor in its success.
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Parker also highlighted the Jordan Brand, which has lost market share to Adidas in recent years, as a strong growth opportunity for 2019, with double-digit growth in the quarter and “healthy, sustainable growth in North America.”
In earnings previews, some analysts had expressed concerns that tariffs and other trade-related factors might weigh on the company’s production costs, since China is both an important growth market and a significant manufacturing base for Nike (though, like many of its competitors, it has moved much of its production to Vietnam in recent years).
Nike did note that higher product costs were a factor, but they were outweighed by higher average selling prices and margin expansion in NIKE Direct, and the company managed to increase gross margins by 80 basis points to 43.8 percent for the quarter.
“Amidst an increasingly dynamic macro environment, what is certain is that Nike’s execution of the “consumer direct offense” is driving consistently strong growth across our diverse, global portfolio,” said Andy Campion, Nike’s EVP and CFO in a statement. “As we continue to invest in digital transformation, we are driving consumer-centric disruption in our industry and unlocking new opportunities for growth.”
Nike saw digital growth of 41 percent in the quarter. Online sales fueled $8.9 billion in revenues for Nike Brand, up 14 percent on a currency-neutral basis. Revenues for Converse were $425 million, up 6 percent on a currency-neutral basis.