Nike Climbs as Earnings Top Estimates

(Bloomberg) -- Nike Inc. surged the most since June after its second-quarter results soared past projections, particularly in its two most important regions: North America and Greater China.

Domestically, the world’s largest sportswear company posted its third-straight quarter of growth. That sustained momentum is a critical benchmark for investors. Nike was previously in a yearlong slump at home, letting rival Adidas AG make inroads.

The earnings report was Nike’s first to include the impact of its controversial ad campaign featuring quarterback-turned-activist Colin Kaepernick. The inclusion of Kaepernick in the line of “Just Do It” ads initially rankled investors, though they eventually applauded the move. Parker has said that the ads drove an uptick in traffic and engagement.

“Our teams are driving change, and it’s yielding excellent results,” Chief Executive Officer Mark Parker said on a conference call late Thursday. “We find that the more disruptive we are, the more we grow.”

The shares gained as much as 9.4 percent on Friday and were up 9.2 percent to $73.75 at 10:17 a.m.

Separately, Nike announced Friday morning that it had hired G. Scott Uzzell from Coca-Cola Co. to serve as CEO of its Converse brand, replacing the retiring Davide Grasso. Uzzell, who headed the beverage giant’s emerging-brands group, is the second Coca-Cola veteran picked to lead a Nike division in as many months: The company tapped Craig Williams as president of its Jordan brand in November.

China Growth

In China -- Nike’s fastest-growing and highest-margin region -- strong growth should alleviate concerns that political and currency volatility will hurt the business. Sales in China rose to $1.54 billion, a 26 percent jump over the same period last year. It’s the 18th consecutive quarter of growth for Nike in the world’s most populous country, according to Chief Financial Officer Andy Campion.

“We have not seen any impact on our business from some of the U.S.-China dynamics that we’re all reading about,” Campion said on the call.

Overall, Nike’s $9.37 billion in sales topped estimates of $9.2 billion. Earnings per share and gross margins also outperformed expectations.

The Beaverton, Oregon-based company boosted its full-year outlook for both revenue growth and gross margin. Campion said that Nike now expects currency-neutral revenue to be in the high single digits over the full year.

The positive results come as Nike works to revamp both its production and retail strategy. As part of the Triple Double campaign, the company is doubling its resources in three areas: innovation, speed and direct-to-consumer efforts. That means paring down the number of retailers it works with and focusing more on sales through its app and website.

It also includes a renewed approach to its Nike stores. In the last two months, Nike has opened new House of Innovation flagship shops in both Shanghai and New York City, both of which blend the in-person and online shopping experience.

Nike saw specific momentum in its women’s business, with footwear sales up 20 percent for the quarter. The Women’s World Cup is next year in France, and Parker said the company’s next Just Do It marketing would be focusing on female athletes.

“We think 2019 is going to be a true tipping point for women in sports,” Parker said, “with more participation, more coverage and more energy.”

To contact the reporter on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, John J. Edwards III, Lisa Wolfson

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