The general recovery of the sportswear market, catalyzed by the steady growth in the sales of leading apparel brands, bodes well for Nike which has been expanding its direct-to-customer channel aggressively. It needs to be noted that the company’s wholesale tie-ups with retailers like Foot Locker (FL), Nordstrom (JWN) and Dick’s Sporting Goods (DKS) are working well.
In the second quarter, double-digit growth in the sales of apparels and footwear drove up earnings by 13% annually to $0.52 per share, while revenues jumped 10% to $9.4 billion. The management has been betting on the company’s expanding supply chain and innovations in the product pipeline – with focus on off-the-court models – to improve performance in the current fiscal year.
Under Armour last month reported a 2% increase in fourth-quarter revenues to $1.4 billion, which resulted in flat earnings. A further slump in the Americas was more than offset by the positive outcome in other markets. Meanwhile, North America continues to be a challenging market for most sportswear companies, due to the growing competition and people’s fast-changing shopping habits.
Related: Nike Q2 2019 Earnings Conference Call Transcript
Nike was in news for the wrong reasons recently, after Duke basketball player Zion Williamson’s sneaker exploded during a game, causing minor injuries to the player. However, the incident had minimal impact on the stock, which bounced back quickly from the initial dip that followed the report.
After falling to a six-month low towards the end of last year, the stock regained strength at the beginning of 2019 and reached a record high this month. It has gained 30% in the past twelve months, outperforming the S&P 500 index.