Nike posts slowest quarterly sales growth in nearly 7 years

Nike Inc posted its slowest quarterly sales growth in nearly seven years in the face of intensifying competition from Adidas AG and said it expects a further drop in revenue from North America.

Shares of the Dow component were trading down 3.7 percent at $51.71 after the bell on Tuesday.

Nike is battling pressures on many fronts - in North America a reinvigorated Adidas has taken market share, while athleisure, a decade-long trend that saw shoppers wear sports apparel for formal and informal occasions, has been fading.

Certain retailers may respond to the weak demand in North America through door closures and potential discontinuities, which could lead to contraction of revenue in the market in the current quarter, Nike said on a post-earnings call.

Beaverton, Oregon-based Nike also said it expects its second-quarter revenue to grow in the low single-digit percentage range.

Bankruptcies from Sports Authority and Sports Chalet earlier in the year have seen Nike’s distribution channels weaken and those that remain - sporting goods retailers such as Finish Line Inc and Dick’s Sporting Goods Inc - have called out sharp falls in store visits and the need to cut prices to battle online competition.

Finish Line, earlier this year, had also pointed out a lack of innovation in shoe styles in the market from footwear makers to have dampened demand.

Nike’s gross margins fell 1.8 percent to 43.7 percent, while inventory was up 6 percent in the first quarter ended Aug. 31, driven by higher off-price sales.

Revenue from North America, the company’s largest revenue contributor, fell 3 percent - its first decline in more than 10 quarters.

However, Nike said it banked on international sales to meet its mid single-digit revenue growth target for the year.
Sales from Greater China rose 9 percent and revenue from the Europe, the Middle East and Africa (EMEA) region grew 4 percent in the quarter.

Total revenue rose marginally to $9.07 billion, while Nike said it earned 57 cents per share.

Analysts on average had expected revenue of $9.08 billion and earnings of 48 cents per share, according to Thomson Reuters I/B/E/S.