NIKE (NKE 82.77, -0.89, -1.1%) is down after reporting its first earnings miss in seven years. The stock briefly climbed above its 50-day moving average (83.76) at the start of the session before slipping back below that level.
While the earnings miss was a disappointment, the company maintained its guidance for FY20, which has kept shares from falling deeper into the red.
The manufacturer of athletic apparel reported below-consensus Q4 EPS of $0.62 on a 4.0% yr/yr increase in revenue to $10.18 bln, which was ahead of expectations.
NIKE's earnings shortfall was due to higher selling and administrative expenses (to $3.41 bln from $3.12 bln) and a higher tax rate (to 20.4% from 6.4%). A portion of the increase in administrative expenses was due to higher spending on demand creation. This spending increased 3% to $1.00 bln.
The increase in costs was outweighed by higher average selling prices, resulting in an 80 basis point increase in gross margin to 45.5%.
Looking at the revenue mix, NIKE saw a 7.5% yr/yr increase in sales in North America, with growth in all three product categories (footwear, apparel, and equipment). The Q4 growth rate was essentially in-line with the growth rate for the fiscal year.
However, sales in Europe decreased 0.4%, representing a deceleration from the 6.2% growth rate for the full year. The Q4 decrease was owed to a 3.8% drop in apparel sales.
Sales in Greater China grew at a healthy 15.6% yr/yr, but that was slower than the 20.9% growth rate for the fiscal year.
Sales in Asia Pacific & Latin America fell 4.0% due to decreases in footwear and apparel sales. For the fiscal year, sales in the region grew 1.7%.
Going forward, NIKE expects that Q1 gross margin could increase up to 25 bps from Q4 while revenue is expected to be in-line or slightly above Q4 revenue. The company reiterated its guidance for FY20, suggesting management is not seeing anything too concerning in the outlook for the medium term.
NIKE's first bottom-line miss in seven years has invited some selling pressure, but better than expected Q4 revenue and reiterated guidance for FY20 have kept losses in check.