Shares in Nike Inc slipped this morning (23 March) after a 4.47% hike in after-hours trading as the US sporting goods giant booked a loss in its third-quarter and announced the acquisition of a leading consumer data analytics firm as part of its Consumer Direct Offense strategy.
Net loss in the three months to the end of February totalled US$921m, compared to net income of $1.14bn a earlier, driven by the enactment of the Tax Cuts and Jobs Act. Nike said it recorded additional income tax expense of $2bn during the quarter.
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The impact of the Tax Act also resulted in one-time provisional charges that reduced diluted earnings per share by $1.25. Consequently, diluted net loss per share was $0.57.
Gross margin declined 70 basis points to 43.8%, due primarily to unfavourable changes in foreign currency exchange rates, which were partially offset by lower product costs.
Total revenues increased 7% to $8.98n from $8.43bn in the year-ago period, and increased 3% on a currency-neutral basis. Sales for the Nike brand reached $8.5bn, up 4% on a currency-neutral basis driven by Greater China, Middle East and Africa (EMEA), and Asia Pacific and Latin America (APLA), including double-digit growth in Nike Direct and growth in sportswear and Nike basketball.
Sales for Converse meanwhile, were down 8% to $483m on a currency-neutral basis, as international growth and digital growth were more than offset by declines in North America.
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By GlobalDataIn the group’s North America business, sales slipped 6% to $3.57bn, while EMEA sales grew 19% to $2.3bn. Greater China sales, meanwhile, were up 24% to $1.34bn, and Asia Pacific & Latin America sales increased by 13% to $1.27bn.
“Nike’s Consumer Direct Offense drove strong double-digit growth across our international geographies, led by Greater China,” said CEO Mark Parker. “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.”
The company’s so-called Consumer Direct Offense is fuelled by the brand’s ‘Triple Double’ strategy: 2X Innovation, 2X Speed and 2X Direct connections with consumers. In essence, the new alignment aims to allow Nike to better serve its consumers personally, at scale – or what the company calls “creating a local business, on a global scale.”
FBR & Co analyst Susan Anderson, notes: “We like Nike’s innovation pipeline, international runway, and long-term margin catalysts, but we remain on the sidelines until we see a positive inflection in North America and margins or a more attractive valuation.”
Meanwhile, Nike has acquired Zodiac Inc, a leading consumer data analytics firm, based in New York City and Philadelphia, as part of its Consumer Direct Offense strategy.
“The acquisition of Zodiac demonstrates our commitment to further accelerating Nike’s digital transformation and enhancing our consumer data and analytics capabilities to help us serve consumers globally,” said Adam Sussman, vice president and chief digital officer at Nike. “We’re adding world-class data-science talent and best-in-class tools to power one-to-one relationships with consumers through digital and physical consumer experiences.”
