Nike (NKE) reported an increase in international sales drove Q2 ‘18 revenue up 5% YOY (to $8.6 billion), but that growth couldn’t prevent the company from experiencing a 9% YOY decline in earnings (to $767 million) resulting from reduced gross margins and increased selling/administrative costs. Revenue in China was up 16% YOY (to $1.2 billion) during the most recent quarter, with sales in Europe, the Middle East and Africa up 19% YOY (to $2.1 billion). Domestically, sales were down 5% YOY (to $3.5 billion) with the decline attributed to disappointing footwear sales. As the company moves forward, it will continue to focus on a DTC strategy, relying less on struggling retailers.
Howie Long-Short: Nike announced back in October that it would scale back on the number of retailers it worked with, focusing on just a few dozen relationships, as the company looks to increase its e-commerce business (from 15% of revenue to 30% over the next 5 years). The decision appears to be a prudent one, as the brand continually appears atop lists of creditors with the biggest unsecured claims on bankruptcy filings (see: Golfsmith International Holdings, Sports Authority and Shiekh Sports). The latest, The Sports Zone, Inc. filed for bankruptcy owning NKE $1.9 million. Good luck, collecting on that unsecured claim.
Fan Marino: Nike’s “pro hijab” went on sale in the U.S. on Wednesday, coinciding with a marketing campaign featuring fencer Ibtihaj Muhammad, boxer Zeina Nassar and runner Manal Roston. Muhammad is first US athlete to compete in the Olympics wearing a hijab. How did Muhammad end up fencing? It was a sport that allowed to her to compete while remaining fully clothed, as required by her religion.
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