Jefferies Analyst: Nike “Crushed It” With First-Quarter Earnings

by | Sep 26, 2019 | Markets

The company’s shares soared after a positive earnings report.

This week, Nike released its fiscal first-quarter earnings report and the results beat analyst expectations. By midday, the company’s shares rose more than 6% to reach a new 52-week high of $92.79. Nike’s shares are up 22% year to date.

According to CEO Mark Parker, this is the result of recent investments the company made. During the first quarter, Nike focused on improving its sneaker line as well as building the e-commerce side of its business. Here is an overview of Nike’s first-quarter earnings results:

  • Earnings per share: 86 cents per share, as opposed to forecasted 70 cents
  • Revenue: $10.66 billion, as opposed to forecasted $10.44 billion

Things that went well during the first quarter

This year, one of Nike’s main focuses has been to do a better job appealing to women. The company is working on being more inspirational, which is a message that is more appealing to women. The company used tennis champ Serena Williams as its brand ambassador.

And Nike rolled out dozens of new styles of sports bras and yoga pants. These investments seem to have paid off since its women’s business grew by double digits during the first quarter. 

The company also launched a subscription service for kids called Nike Adventure Club.  It’s designed for kids ages two to 10-years-old and lets parents order new shoes on a monthly, bi-monthly, or quarterly basis. 

This is the first subscription service ever launched by a major sneaker retailer. Nike was able to capitalize on back-to-school shopping, mostly thanks to this subscription service. According to a Nike spokesperson, the kids’ section is one of the fastest-growing segments on the company’s website. 

All of these factors helped the company’s revenue grow by more than 7% year over year. Sales in North America were up by 4% while revenue in China grew by 27%, even in spite of the ongoing trade war. The company’s gross margins grew by 45.7% as well.

What’s next for Nike?

Nike did well during the first quarter and analysts responded favorably to the news. An analyst at Cowen & Co. raised its price target from $100 per share to $103, citing the company’s strong growth potential. A Jefferies analyst also raised the price target, saying Nike “crushed it” during the first quarter. 

Going forward, Nike expects more of the same during the fiscal second quarter. The company reaffirmed its full-year fiscal guidance and raised its outlook for its gross margins.