Nike Inc did something highly out of character on Thursday: It missed earnings estimates.
The athletic brand posted profit of US$0.62 a share, short of the US$0.66 average projection. That has not happened since the middle of 2012, seven years ago.
The company blamed higher overhead expenses, along with a steeper tax bill, for weighing on earnings. Its effective tax rate was 20.4 percent — compared with just 6.4 percent a year earlier, partly due to the US tax overhaul passed in 2017.
After the jolt of Nike missing earnings, investors sent the shares down as much as 4.9 percent to US$79.56 in extended trading, although they soon took it in stride. As of 5pm in New York, the stock had rebounded and was little changed from the close.
Nike’s revenue met projections, reassuring investors that its efforts to find new growth opportunities remain on track.
Sales rose 4 percent in the fiscal fourth quarter to US$10.2 billion, a record for the world’s largest athletic brand. When holding currency neutral, the increase was 10 percent.
Nike’s growth stalled in 2017, but it has gotten back on track in the past two years. Still, the increases have been slowing.
Nike remains in a better position than most in the athletic-gear industry amid trade tensions between the US and China. Only about 26 percent of Nike’s footwear and apparel were made in China last year, and according to Susquehanna Financial Group, less than 10 percent of that is imported to the US.
So far, Nike has not been affected by the trade spat, executives said on a call with investors.
The company actually continues to source products from China, and sees an opportunity to expand production there, they said.
Nike plans to launch its app in China, as well as unveil women’s apparel for the Asian market, in the coming months. Some of the innovations developed for China could eventually make their way into other markets.
“China is putting us in a better position to be a better global company,” Nike chief executive officer Mark Parker said on the call.
In December last year, Parker said that this year would be a “true tipping point” for women in sports.
Nike outfitted 14 of the 24 teams in the ongoing women’s FIFA World Cup and expects to see large gains in the category.
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