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Trends & Analysis
News

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Nike shares tank despite big FQ3 earnings beat

 

Monday, March 25, 2024

Today’s headlines

What’s happening: Shares of Nike fell on Friday, after the company released results for its fiscal third quarter.

What happened: The apparel and footwear company reported better-than-expected sales and earnings for the latest quarter.

However, Nike’s shares came under pressure on Friday due to concerns around the company’s prospects.

How were the results: The Beaverton, Oregon-based company reported some growth in sales for the fiscal third quarter.

  • Revenues grew by 0.3% year-over-year to $12.429 billion, topping the consensus estimates of $12.281 billion.
  • Adjusted earnings came in at 98 cents per share, significantly exceeding Wall Street expectations of 74 cents per share.

Why it matters: Nike has recently been losing market share to some newer brands. After heavy promotions on its Jordan shoes during the holiday season, Nike reported a 3% gain in North America, its biggest market, and a 5% expansion in Greater China.

Nike’s Brand Digital sales contracted by 3% year-over-year last quarter, while wholesale revenues rose 3% year-over-year to $6.6 billion.

The Nike brand reported sales of $11.9 billion, up 2% year-over-year, while Converse’s revenues declined by 19% year-over-year to $495 million.

Nike’s gross margins expanded by 150 basis points to 44.8% in the fiscal third quarter. The company closed the quarter with cash and cash equivalents worth $10.6 billion.

“We are making the necessary adjustments to drive Nike’s next chapter of growth,” Nike CEO John Donahoe said.

However, Nike warned of a decline in revenues by a low single-digit percentage during the first half of fiscal 2025. The company kept its fiscal 2024 revenue growth guidance unchanged at 1%.

How shares responded: Nike’s shares fell 6.9% to close at $93.86 on Friday, following the release of quarterly results. The stock has lost around 10% over the past month.

What to watch: Investors will monitor growing competition for Nike, with newer and more innovative sports shoes and other items entering the market.

The markets today

Crude oil will be in focus today after closing lower on Friday

Context: Crude oil futures settled lower during Friday’s session but ended the week in the black.

Details: Investors continued assessing situation in Ukraine. The US has asked Ukraine to end its attacks on Russia’s energy facilities, warning that drone attacks on the country’s refining facilities could send oil prices higher in the global market.

Crude oil had been on a downtrend after the US Federal Reserve announced its policy decision on Wednesday. While keeping interest rates unchanged at the meeting, the central bank signalled three rate cuts this year.

Strength in the US dollar exerted pressure on crude oil prices, making the commodity more expensive for foreign currency holders, which impacts demand. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 1% to 104.43 on Friday.

WTI crude oil for May delivery declined by 44 cents, or 0.5%, to close at $80.63 per barrel on the NYMEX (New York Mercantile Exchange). WTI prices ended the week with gains of around 0.1%.

May Brent crude, which is the global benchmark for oil, lost 35 cents, or 0.4%, to close at $85.43 per barrel on ICE Futures Europe. Brent crude also gained 0.1% last week.

In other energy trading, April gasoline rose by 0.5% to $2.74 a gallon, recording a 0.7% gain for the week, while April heating oil fell by 0.6% to $2.65 a gallon, down 2.7% for the week. Natural gas for April delivery fell 1.4% at $1.66 per million British thermal units on Friday but added 0.2% last week.

What to watch: Investors await the release of inventories data from the API (American Petroleum Institute) and EIA (Energy Information Administration) this week. Crude oil inventories in the US had declined by 1.952 million barrels in the week ended March 15, versus market estimates of a rise of 0.013 million.

Other Markets: European indices closed mixed on Friday, with the CAC 40 and STOXX Europe 600 Index down by 0.34% and 0.03%, respectively, and the FTSE 100 and DAX 40 up by 0.61% and 0.15%.

The news shaping the markets

Ukraine said it hit two Russian naval vessels in a major attack on the Crimean port of Sevastopol. The news sent the safe-haven US dollar index higher in forex trading this morning.


Fitch Ratings revised the UK’s sovereign credit outlook from negative to stable, lending support to the GBP/USD forex pair.


Colombia’s central bank reduced its benchmark interest rate to 12.25% at its March meeting. Although this was in-line with expectations, it sent the COP/USD pair higher in forex trading this morning.


Canada’s retail sales grew by 0.1% in February, compared to a 0.3% decline in January, which lent support to the CAD/USD forex pair.


Mexico’s economic activity gauge rose by 2% year-over-year in January. This marked a significant recovery from the two-year low of 1.1% recorded in the prior month and sent the MXN/USD pair higher in forex trading this morning.

What else to watch today

South Africa’s FNB/BER consumer confidence index, Spain’s producer prices change and consumer confidence indicator, UK’s CBI distributive trades, Brazil’s current account, foreign direct investment and Central Bank of Brazil focus market readout, as well as US Chicago Fed National Activity Index, new home sales, Dallas Fed manufacturing index and building permits.


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