Nike shares rise as strong quarterly results allay China demand concerns

(Reuters) – Nike Inc (NKE.N) shares rose 9 percent on Friday, after the company’s solid quarterly results eased worries that escalating trade tensions between Washington and Beijing would weigh on China demand and hurt the sportswear maker’s growth story.

FILE PHOTO: People walk past a Nike store in New York City, New York, U.S., September 4, 2018. REUTERS/Carlo Allegri

The company’s double-digit percentage growth in China was in addition to strong demand in North America, Nike’s biggest and most competitive market, where sales got a boost from higher full-priced sales and a rebound in Jordan sneakers.

In a note titled “A perfect quarter in an imperfect world,” Jefferies analyst said that Nike’s results this quarter were perfect amidst global trade disruption cited by FedEx.

Earlier this week, FedEx Corp (FDX.N) stunned markets with a drastic cut in its full-year profit forecast, citing global trade worries.

On a post earnings call with analysts on Thursday, Nike’s Chief Financial Officer Andy Campion said that the company had not seen any impact from the ongoing trade friction.

“Clear indications of better sales in the U.S. and elsewhere, including China, should help to comfort investors increasingly worried about the potential for macro slowdown,” Oppenheimer analyst Brian Nagel said.

Nike has focused on new launches as well as on a direct-to-customer model of own stores and online sales to temper the hit from bankruptcies of sports retailers and competition from the likes of Adidas AG (ADSGn.DE) and Under Armour Inc (UAA.N) in the United States.

Its efforts have borne fruit. The company engineered a rebound in its North America market, clawing back market share from global rivals.

“Nike is boxing out its competition … the results illuminate the progress that Nike has made, and the guidance, which appears conservative, highlights the opportunities ahead,” Susquehanna analyst Sam Poser wrote in a note.

For 2019, Nike forecast revenue to rise in the high single-digit percentage range and potentially touching double-digit growth.

At least two brokerages upgraded Nike stock to their highest rating following its better-than-expected results.

Wall Street’s sentiment on the stock is bullish, with 24 of the 37 analysts covering the stock rating it “buy”. The median price target on the stock is $87, while Nike’s shares were trading at $73.76 in morning trading.

Nike shares were the biggest boost to the broader Dow Jones Industrial Average .DJI and the S&P 500 Index .SPX on Friday.

The results also lifted shares of its retail partners. Foot Locker (FL.N), which gets two-thirds of its merchandise from Nike, was up 5 percent, while Britain’s biggest sportswear chain JD Sports (JD.L) rose 6 percent.

“In the end, China sales concerns have been diminished and Nike is executing solid strategies which should continue to drive increasingly profitable global market share gains,” Wedbush Securities analyst Christopher Svezia said.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sweta Singh

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