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Nike Shows Signs of Rebound After Rocky Year

Published on .

Shoppers pass in front of a Nike store at the Scottsdale Quarter shopping mall in Scottsdale, Arizona,
Shoppers pass in front of a Nike store at the Scottsdale Quarter shopping mall in Scottsdale, Arizona,  Credit: Caitlin Ohara/Bloomberg

After a sales slowdown and job cuts this year, Nike is giving investors reason to be optimistic again.

The athletic brand posted earnings of 60 cents a share for the latest quarter, beating the 50 cents predicted by analysts. The results sent the shares up as much as 4.4% in late trading on Thursday.

The performance is helping ease investor fears that Nike is losing its edge to rivals, especially Adidas AG. The company rattled shareholders three months ago with disappointing sales, signaling that Adidas and Under Armour were grabbing market share. The latest results suggest Nike is better defending its turf -- especially in overseas markets.

"Nike continues to create both near-term wins in today's dynamic environment and a lasting foundation for future growth," Chief Executive Officer Mark Parker said in a statement.

The shares rose as high as $55.50 in after-hours trading. The stock had lost 3.6% in the past year through Thursday's close.

Even with the rosier outlook, Nike's efforts are still a work in progress. The Beaverton, Oregon-based company has been cutting jobs and shaking up management ranks in a bid to speed up its operations and reduce bureaucracy. It's also forging a deal with Amazon.com to sell shoes directly through the website, a person familiar with the situation said last week.

As part of the belt-tightening plan announced earlier this month, the company will cut 2% of its workforce -- about 1,400 job. It's simplifying its organization to focus on four regions, rather than six, and aiming to build a closer connection with shoppers.

Chinese Growth

Revenue rose 5.3% to $8.68 billion in the fiscal fourth quarter, which ended May 31. That topped the average estimate of $8.63 billion.

Sales in North America, Nike's largest and most competitive market, were flat. But the company posted stronger growth in China and emerging markets.

When it reported results for the previous quarter in March, the company said that global orders fell 1% -- the first drop since the recession in 2009. That knocked down the stock the most in 19 months.

Nike has responded to the slowdown by trying to sell more goods through its own stores and websites. That's made the company less dependent on its retail partners.

Nike, founded more than 50 years ago as Blue Ribbon Sports, still has ambitious growth targets. It said in October 2015 that it plans to increase annual sales to $50 billion by the end of fiscal 2020. For fiscal year that just ended, revenue rose 6.1% to $34.4 billion.

-- Bloomberg News

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