Nike beats on earnings, but “not satisfied” with own performance
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Nike beats on earnings, but “not satisfied” with own performance

Despite beating analysts’ expectations on earnings per share (which were up 24%, year-on-year), Nike is dissatisfied with its third quarter performance. Nike’s revenue was up 5% from the year-ago quarter, but Wall Street expected more, and investors were quick to punish the stock. Nonetheless, Nike’s performance this year remains emphatically positive – and while its underlying fundamentals were not awe-inspiring, they were all positive.

Even after the drop, Nike’s share price is +9% year-to-date

nike 24 gph

SOURCE: Yahoo Finance

Nike’s chief financial officer, Andy Campion, addressed concerns directly, saying:

"We are pleased with the results that we delivered in Q3, and, at the same time, we are not satisfied. We are clear-eyed with respect to the challenges we have faced and opportunities we have not fully capitalized upon in the short-term."

Part of Nike’s struggle in the last quarter comes from renewed vigour at Adidas. The latter company, also a Dominion holding, has outperformed over the last two years, putting itself back on the map and becoming the fastest growing sportswear brand in North America.

Nike’s response to this situation is to debut a new strategy: the “triple double”. This refers to three areas where the company plans to double its existing efforts. It will double the “cadence and impact” of innovation (in fact, it has more than doubled its financial investment into innovation already), it will double the speed at which it gets its products to market, and it will double its “direct connection” to consumers.

While it is working on these three goals, Nike will remain relatively conservative, aiming to protect its still concrete position as market leader in the U.S. Campion said:

"Based upon the breadth and depth of our portfolio, we anticipate that the currently dynamic overall retail marketplace will create both puts and takes in the short-term. So, we are being appropriately measured with respect to our Q4 financial targets for North America. We will keep supply tight, maintaining the strong foundation we’ve created, while we bring new innovation to market and accelerate more direct consumer connections."

Disclosure

Dominion holds both Nike and Adidas in its Global Trends Luxury Fund.


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