Nike Q2 Earnings Blow Past Forecasts As Digital Efforts Take Hold

Nike Inc. today reported second-quarter results after the market close that topped market watchers’ expectations across the board.

The Beaverton, Ore.-based athletic behemoth posted Q2 revenues that climbed 10% year over year to $10.3 billion, outpacing analysts’ expectations of $10.1 billion. (On a currency-neutral basis revenues were up 13%.) Profits, meanwhile, advanced 32% to $1.1 billion, or 70 cents per share, trouncing forecasts for earnings of 58 cents per share.

In a statement, Nike chairman, president and CEO Mark Parker touted the firm’s accelerated digital efforts, which have seen the brand throw significant investment behind new products and services, expand its apps to other regions and beef up partnerships with e-commerce platforms such as China’s Tmall and WeChat services. The firm has also ramped up its strategic acquisitions, including the purchase of NFL star Russell Wilson’s TraceMe startup with a built-in sports-prediction service.

“In Q2, Nike has proven again that innovation is our greatest competitive edge — turning athlete insights into breakthrough product and digital services, as we offer more choice to more consumers at an accelerated pace,” said  Parker. “Our entire Nike team is fueling our current momentum, and I’ve never been more optimistic about the future of this company.”

In tandem with the execution of Nike’s two-year-old “Consumer Direct Offense” plan, Parker will exit his role in January, handing over the reins to tech-focused executive John Donahoe, president and CEO of ServiceNow Inc. and chairman of PayPal Holdings.  Parker will remain with the company as executive chairman.

By division, revenues for the Nike brand were up 12% on a currency-neutral basis to $9.8 billion, driven by growth across wholesale and Nike Direct with key categories including Sportswear, the Jordan Brand and Running, the company said. Footwear revenues also improved 12% to $6.2 billion with apparel sales up 8% to $3.3 billion. Revenues for Converse gained 15% on a currency-neutral basis to $480 million, mainly driven by double-digit growth in Asia and Europe, as well as through digital across regions.

“Nike delivered another strong quarter of accelerating, high-quality growth, driven by strategic and targeted investment in our digital transformation,” said Andy Campion, Nike EVP and CFO. “As we deliver a relentless flow of innovation and scale Nike’s digital advantage, we are positioned for even greater competitive separation and long-term shareholder value creation.”

As of 4:45 p.m. ET, shares for Nike Inc. were in the red 0.6% to $100.54 as investors likely signal caution over negative impact on the firm’s gross margin stemming from new tariffs it faced during the quarter. Nike said its gross margin increased 20 basis points to 44% thanks to higher average selling prices and margin expansion in Nike Direct and Converse, but that growth was partially offset by impacts from higher product costs, related to incremental tariffs in North America.

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