Joined: 29 Dec 2017
|Global athletic retail giant (NYSE:NKE) reported second-quarter numbers last week, and they were pretty unexciting for NKE stock investors.
It was a headline double beat with earnings coming in 6 cents above expectations and revenues coming in $150 million above expectations. But the underlying numbers weren’t great.
Revenues inched up just 3% in constant currency. That is better than last quarter’s 2% growth rate, but it continues a broader trend of slowing revenue growth (up 8% last year and up 12% the year before that). The North American business continues to be weak, and it is actually getting weaker (down 5% this quarter versus down 3% in the first quarter and up 3% last year). The guide doesn’t point to much strength for .
Meanwhile, gross margins continue to be under pressure. The headwinds dragging on gross margin — unfavorable exchange rates and higher per-unit product — are expected to persist. Gross margins are expected to fall 50-100 basis points this year. Operating expenses are swelling, with SG&A growth (10%) outpacing revenue growth (5%). All in all, earnings-per-share fell 8% year-over-year.
The big picture for ? Second-quarter numbers weren’t great.
And yet Nike stock, which had rallied about 30% in the months leading up to the report, hardly budged. It dropped a bit the day after the report, but it has rebounded since then to trade just below pre-earnings levels.
This illustrates a unique resilience in . This resilience tells me that when it comes to NKE stock, investors are ignoring quarter-to-quarter noise and are instead focusing on the long-term game with Nike.