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Nike Inc (NYSE:NKE) witnessed its stock rise by over 2% in after-hours trading following the release of its fiscal first-quarter earnings report, which outperformed analyst expectations on earnings per share (EPS) but fell short on revenue. The revenue miss was primarily attributed to weaknesses in the North American market and a slowdown in the crucial Chinese market.
For the fiscal first quarter, Nike reported an EPS of $0.94 on revenue totaling $12.94 billion. Analysts, as per Investing.com’s poll, had anticipated an EPS of $0.75 on revenue amounting to $13.02 billion.
Notably, Nike’s digital sales under the Nike brand saw a 2% increase. However, this growth in the EMEA (Europe, Middle East, and Africa), Greater China, and Asia-Pacific Latin America regions was somewhat offset by a decline in North America.
Sales in North America experienced a 2% decrease, while in China, a key market for the company, sales rose by 5% to $1.74 billion. However, this figure fell short of StreetAccount estimates, which had predicted sales of $1.84 billion for China.
Nike’s gross margin contracted by 10 basis points, settling at 44.2%. This margin pressure was attributed to “higher product costs and unfavorable changes in net foreign currency exchange rates, largely offset by strategic pricing action,” according to the company’s statement.
Despite the decline in gross margin, it was noted that the margin contraction was not as severe as the earlier guidance, which had projected a decline of 50 to 75 basis points. Wedbush, in a note, emphasized this point and cautioned that the guidance provided during the earnings call for the fiscal second quarter might also fall short of expectations.
Wedbush further added that considering the second quarter presents the most challenging revenue comparison of the year, investors should prepare for an outlook that may not meet the Street’s projections of +2% revenue growth and a consensus forecast of $0.93 EPS.
