Nike Inc.

Nike Inc.

30 September 2016

Important legal information

Nike, the leading sportswear brand, reported fiscal first quarter results this week. While top and bottom line numbers were very strong and beat earnings estimates, the overall picture was not perfect.

Especially the gross margin fell to 45.5% and now notes under the peer groups average of around 46.87%. In comparison to 46.2% for Columbia Sportswear, 47.7% for Under Armour and 49.3% for Lululemon Athletica.

 

The operation income of Nike was down 11% year over year (YoY), which is related to the high demand creation expenses towards the European football championships and the Olympics. This numbers could also reflect the highly competitive threats, coming from Adidas and Under Armour.

 

Furthermore, Nike’s future orders just rose 7% YoY, missing Analyst’s expectations of 8%. The future orders provide a view of the orders that Nike receives in advance to provide the products within a stipulated timeframe. The small increase could on the one hand represent that the competitors are stealing Nike market share. On the other hand it could simply show the change in the retail industry: people tend away from buying in typical sports stores to buy more in special Nike stores and especially their online shop. Nike’s Direct-to-Consumer (DTC) revenues-grow of 22% YoY could confirm this. This growth was driven by a 49% rise in online sales, 8% growth on sales comps, and new store openings.

 

In addition, Nike’s inventory continued to rise by 11% during the quarter, which could be a cause of a possible slowdown in demand. The mentioned slowdown in future orders further adds to the concern.

 

The Dow Jones listed company pays a consistent dividend. For straight 14 years it has increased its dividend per share. Over the past six years the DPS has grown at an average of round about 15%. In fiscal 2016 Nike paid 62 cents in dividends per share, which is a dividend payout ratio of about 32%. The company plans to keep the ratio between 25% and 35% over the next four to five years. The future development remains to be seen.

 

Investors did not react too amused about the news: Nike’s stock fell almost 6% after the earnings release until the end of the week. However, a recovery of the share price has good potential. Bloomberg consensus set the 12-month target price to 64,59 USD and as of September 30th 2016, the share price of Nike opened at about 52,16 USD. According to Bloomberg, 21 analysts set the stock on BUY and 13 on HOLD recommendation. No analyst sets the Nike on SELL. The sports company’s current P/E ratio notes at 23,5 with an market capitalization of 87,519M.

 

04/12/2020 22:24:30