Just do it: Nike’s home market is getting its mojo back
Performance beat company’s forecast for flat sales in North America
Sales at its North America business rose 3.3 per cent in the quarter which ended on May 31st. Photograph: Stuart Franklin/Getty Images
Nike shares jumped 12 per cent to their all-time high on Friday after the world’s largest shoemaker saw a major sales rebound in its North America business and forecast strong growth for 2019.
At least 14 Wall Street analysts raised their price targets following Nike’s better-than-expected quarterly results, with Susquehanna the most bullish, raising its target by $14.
Nike maintained its rapid growth overseas, where it generates more than half its revenue. China sales rose 35 per cent in the quarter ended May 31st, while revenue from Asia Pacific and Latin America gained 12 per cent.
Sales in Europe, the Middle East and Africa rose 24 per cent. A 20 per cent spike in apparel sales helped fuel the gains.
Sales at its North America business rose 3.3 per cent in the quarter after having fallen for most of the year. Overall sales were $9.8 billion, surpassing analysts’ average estimate of $9.4 billion.
Profit, meanwhile, got a boost from the corporate tax cuts passed last year in the US. The company’s rate fell to 6.4 per cent – half of its rate a year ago – and it shaved $82 million off its tax bill.
“Nike delivered the closest thing to a complete game for a public company,” said Barclays analyst Matthew McClintock, who boosted his target to $85 from $80.
The company’s focus on its digital platform and launch of sneakers, such as Air Max 270 and Epic React, not only helped it fight off competition from German rivals Adidas and Puma, but also deliver on its promise of a significant reversal in its home market.
The company is also gaining on the resurgence of 1990s fashion trends that is helping boost sales of its classic sneakers. Analysts at Credit Suisse said strong results prove that several years of distribution disruption, bloated inventories, lacklustre innovation and market share losses are in the past.
The company also said it expected 2019 revenue to be in the high single-digit range, compared with its earlier forecast of mid-to-high single-digit growth. It also announced a $15 billion buyback program. – Reuters/Bloomberg