The clothing company
NIKE
-3.29%
closure:0
opening:97.93
High:97.99
low:94.48
cycle:—
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Although it surpassed the analysts’ expectations in the top line, it missed the gross profit rate which was 44.3% compared to the analysts’ expectations of 45.3%. The profit per share was $0.93, in accordance with the forecast of the analysts and the percentage of growth in the digital sector was 16% compared to the expected 11.3%. The stock drops sharply in the aftermath, apparently from the drop in the gross profit rate combined with stability in earnings per share – investors do not appreciate the fact that the company earns fewer dollars on each product it sells.
The company’s stock has already fallen by more than 42% and is now expected to fall even more. The analysts expected weak reports for Nike due to a headwind from China, the chain of supply problems and the strengthening of the dollar exchange rate, and indeed this is what actually happened. The company missed revenue forecasts from China and claimed that its costs rose in the first quarter by 10%. The profit per share of $0.93 is much lower than what the company had in the corresponding quarter – $1.16 per share, another disappointment which indicates the direction the company is going, even though the analysts expected it.
In addition to the gross margin miss and tepid earnings per share, the company’s stock grew significantly more than analysts expected. The inventory at the end of the quarter was 9.6 billion dollars, about 40% above the expectation of the analysts who estimated that it would be less than 7 billion dollars. Deutsche Bank analyst Gabriela Carbone lowered her price target for Nike shares to $123 from $130 but maintained a “buy” rating. The company’s stock is down from a price of $90 in late trading after it was at $95.3 at the end of trading at a value of $149 billion.
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