Nike Gross Margins Disappoint for Quarter Before Kaepernick Controversy
(Bloomberg) -- Nike Inc. shares dropped after the company reported gross margins that missed analyst estimates. Other numbers, including North American sales and overall revenue, outpaced expectations for the quarter, which closed a few days before the company’s headline-capturing ad featuring Colin Kaepernick.
- Nike’s gross margins narrowly missed estimates, a sign that investors are concerned about the company’s profitability and higher production costs.
- Gross margins are particularly important because Nike’s biggest long-term focus is lessening the company’s reliance on retail partners by strengthening sales via its own channels. Sales made on Nike’s website and app have much better margins and give the brand more control over its product.
- In positive news, a U.S. resurgence is sticking around. Nike posted its second straight quarter of growth in its home market, with sales there rising to $4.15 billion, a six percent increase over the same quarter last year. That’s extremely important for Nike, which is coming off a year-long slump in the region.
- Overseas results were mixed. The company beat sales estimates in the region defined as Europe/Middle East/Africa and missed in Greater China and its Asia Pacific/Latin America sector. Chief Executive Officer Mark Parker has said 75 percent of the company’s growth in the next few years will come from overseas.
- Nike’s quarter ended Aug. 31, a few days before the company unveiled its controversial ad campaign featuring NFL-quarterback-turned-activist Kaepernick. Research from Edison Trends, which scans receipt data from more than 200 online retailers (including Nike.com) suggests that the company’s sales in the current quarter are tracking ahead of last year.
- While it’s been overshadowed by the Kaepernick ad, the company has experienced significant turnover at the highest levels. In the past six months, at least 11 senior managers have resigned or been fired amid accusations of misconduct and an inappropriate workplace culture.
- Nike shares fell as much as 4.6 percent to $80.92 in after-hours trading before paring some of the loss.
- Last week Nike was trading at an all-time high of $86.04.
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