Nike's EPS Soars, But Revenue Drops and Tariffs Bite
Nike has reported its quarterly earnings, with earnings per share nearly doubling expectations at $0.49. However, the sportswear giant faces challenges ahead, including a revenue decline and increased tariff costs.
Nike's total revenue grew 1 percent to $11.72 billion, exceeding estimates of around $11 billion. Yet, the company anticipates a slight revenue dip in the next quarter, along with a margin burden of 300 to 375 basis points.
Sales in China dropped by about 10 percent, while North American sales rose 4 percent. The wholesale division saw a 7 percent increase to $6.8 billion, bucking analyst predictions of a decline. This growth signals CEO Elliott Hill's turnaround plan taking effect.
The company's gross margin shrank by 320 basis points to 42.2 percent due to higher product costs and increased tariffs. Nike estimates the annual burden from US tariffs to be $1.5 billion.
Despite the mixed results, Nike's earnings per share significantly surpassed expectations. However, investors may consider long-term strategies to mitigate risks, given the current challenges and the company's outlook for the next quarter. Nike's net income plummeted 31 percent to $727 million, reflecting the impact of increased costs and tariffs.
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