NIKE (NKE) is down 4% after the company reported first quarter results and lowered its gross margin outlook for fiscal 2018.
NIKE is the leader in the athletic apparel market. The company continues to innovate and stay ahead of the competition, despite a resurgent Adidas (ADDY), but the challenging retail environment makes growth a challenge in North America.
Nike reported Q1 EPS down 22% to $0.57/share, above estimates. Revenue was flat at $9.1 billion, in-line with guidance. Gross margin fell 180 basis points year-over-year to 43.7% (at the low end of 43.7-44.0% guidance), due primarily to unfavorable changes in foreign currency exchange rates and, to a lesser extent, a higher mix of off-price sales.
Sales growth is healthy internationally, with Europe, Middle East and Africa up +4% to $2.3 billion, China up 9% to $1.1 billion and Asia Pacific & Latin America up 5% to $1.2 billion.
North America sales are under pressure (down 3% to $3.9 billion), however, as the traditional retail channels in the US are challenged by reduced traffic in the face of e-commerce. The promotional activity in North America has weighed on sentiment and earnings.
That said, the new NBA partnership and growth in emerging markets represent a big opportunity for the company.
NKE now trades at ~22x earnings estimates, which is below the historical range and cheaper than Under Armor (UAA) and Adidas (ADDYY).
The stock is attempting to hold support near the $52 level intraday.