Nike returns to growth in North America, tops estimates

[BENGALURU] Nike Inc beat fourth-quarter profit and revenue estimates as new launches and focus on direct-to-customer sales helped reverse declining sales in North America for the first time in a year.

The Dow component's shares rose 8 per cent to US$77.40 and were on track to hit a record at open on Friday after the company also announced a new US$15 billion buyback program and said it expected fiscal 2019 revenue at the higher end of its earlier forecast.

The Oregon-based athletic shoe maker has struggled in North America, its biggest market, as it battles tough competition from a resurgent Adidas and Puma, as well as bankruptcies of sports retailers such as Sports Authority and Sports Chalet.

Nike has responded with an emphasis on new launches and selling directly to customers through its stores and online, while also partnering with Amazon.com Inc.

The company launched several sneakers in the fourth quarter, including singer Kendrick Lamar's Cortez Kenny III line of shoes.

Nike said its new products in the past 3 months - Air Max 270, VaporMax and Epic React - are already the top 3 selling women's athletic footwear models above US$125.

Sales in the North America rose 2.76 per cent, easily beating analysts' estimate of a 0.98 per cent increase, according to Thomson Reuters I/B/E/S.

"They are probably gaining back some of (the) shelf space they lost," Edward Jones analyst Brian Yarbrough said.

Nike said it expects 2019 revenue to be in the high single-digit range, compared with its earlier forecast of mid-to-high single-digit growth.

"I'm confident we'll use this quarter as a catalyst for growth into fiscal '19 and beyond," chief executive officer Mark Parker said on a call with analysts.

Nike said it expects gross margin to expand roughly 50 basis points or slightly greater in 2019, fuelled by full-price sales and growth in its direct-to-customer business.

Fourth-quarter gross margin had expanded 60 basis points to 44.7 per cent.

Net income rose to US$1.14 billion, or 69 US cents per share, in the fourth quarter ended May 31, from US$1.01 billion, or 60 US cents per share, a year earlier.

Excluding one-time items, the company earned 69 US cents per share, beating estimates of 64 US cents.

Total revenue rose 12.8 per cent to US$9.79 billion, also topping estimates of US$9.41 billion.

The company, which has set a US$50 billion revenue target for 2020, said fiscal 2018 sales rose 6 per cent to US$36.40 billion.

REUTERS