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International Demand & Promising US Trends Propel Nike Past Q3 Forecasts

Shares for Nike Inc. are jumping in after-hours trading after the firm reported third-quarter revenues that modestly topped market forecasts and adjusted profits that blew past estimates.

As of 4:45 p.m. ET, Nike shares had gained nearly 5 percent to $67.37 in after-market trading.

The athletic behemoth — which last week announced two abrupt executive departures that some have suggested are linked to internal misconduct issues — said its third-quarter sales increased 7 percent to $9 billion, slightly better than analysts’ forecasts for sales of $8.9 billion. Nike said those gains were driven by growth in international markets, led by China.

The firm unexpectedly posted a net loss of $921 million, or 57 cents per diluted share — a sizable decline from the comparable period when net income was $1.1 billion, or 68 cents per diluted share.  The company said the impact of the Tax Act resulted in one-time provisional charges that reduced diluted earnings per share by $1.25 during the period.

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On an adjusted basis, Nike’s earnings per share were 68 cents — significantly higher than analysts’ forecast calling for diluted EPS of 53 cents.

“Nike’s Consumer Direct Offense drove strong double-digit growth across our international geographies, led by Greater China,” said chairman, president and CEO Mark Parker said. “As we close Q3, we now see a significant reversal of trend in North America, as momentum accelerates through the scaling of new innovation platforms and differentiated Nike Consumer Experiences expand across the marketplace.”

Q3 revenues for the Nike brand were $8.5 billion, up 4 percent on a currency-neutral basis, driven by strength in Greater China, EMEA (Europe, the Middle East and Africa) and Asia Pacific, the company said. The firm also saw double-digit gains in its direct-to-consumer business and growth in Sportswear and Nike Basketball.

Revenues for Converse were $483 million, down 8 percent on a currency-neutral basis, as international and digital growth were more than offset by declines in North America.

During a conference call to review fiscal Q3 results, Parker addressed the recent management shake-up: “We became aware of some behavioral issues that are inconsistent with Nike’s values of inclusivity, respect and empowerment. I’m committed to ensure we have an environment where every Nike employee can have a positive experience and reach their full potential.

“As you know, I’ve publicly committed to serving as chairman, president and CEO of Nike Inc. beyond 2020. Trevor Edwards and I both agreed to a change in leadership structure in the Nike brand at this time. As we transition to our next phase of growth and continue to evolve our culture, Trevor will work as an advisor through this transition until he retires in August, and I’d like to thank him for his important and significant contributions in growing and strengthening the Nike brand throughout the world.”

This story was updated to reflect comments made during Nike’s Q3 conference call.

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