Nike beats on earnings and sales, stock spikes

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Brian Snyder/Reuters

Nike on Tuesday reported earnings and sales for its fiscal second quarter that were better than expected.

Its adjusted earnings per share was $0.50, beating the forecast for $0.43. Sales totaled $8.2 billion, up by 8% excluding the currency impact, and topping analysts’ expectation for $8.1 billion.

Shares gained 4% in after-hours trading following the earnings announcement. The company is the worst performer on the Dow this year, with its stock down about 17% through the market close on Tuesday. It is on pace for its first annual decline since 2009.

The activewear maker continues to operate in a super-competitive industry. One of analysts’ major concerns is how high its gross margins can remain while it entices customers with price cuts.

Higher production costs and deeper discounts contributed to lowering Nike’s margin to 44.2% from 45.6% a year ago. Inventories increased by 9% to $5 billion.

There are also concerns about the company’s market share in North America, as the consumer preference shifts from basketball to retro and lifestyle footwear. Footwear and total revenues increased by 3% year-on-year.

Futures orders – a gauge of sales that reflects demand from retail stores – won’t be included in earnings releases starting this quarter. Nike will mention them during the earnings call as it thinks is necessary.