Nike Shares Ease as Q2 Earnings and Revenue Beat, Gross Margin a Bit Narrower Than Hoped

Athletic-apparel and -equipment producer's shares are up 35% in 2019 to date.
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Nike (NKE) - Get Report shares were lower after hours Thursday after the iconic athletic-apparel and -equipment producer reported stronger-than-expected profit and revenue but gross margins a bit narrower than analysts hoped.

For the second quarter ended Nov. 30 the Beaverton, Ore., company reported earnings of 70 cents a share against 52 cents in the year-earlier quarter.  Analysts surveyed by FactSet were expecting the company to report 58 cents a share. Revenue advanced 10% to $10.32 billion against the estimate of $10.09 billion.

Gross margin fattened by 0.2 percentage point to 44%, while analysts were expecting expansion of 0.25 point. The company said its margin expansion efforts were hurt “primarily due to incremental tariffs in North America.”

Over the past five years, Nike has reported double-digit sales growth in China, but there were concerns that trade tensions between the U.S. and China would weigh on the company’s performance.

Nike reported 20% revenue growth in China to $1.8 billion, led by $1.2 billion in footwear.

The U.S. and Europe remained the company’s biggest markets, accounting for $3.98 billion and $2.53 billion of sales in the quarter, respectively.

“[We] are positioned for even greater competitive separation and long-term shareholder value creation,” said CFO Andy Campion.

Nike shares have climbed 35% year to date. The stock rose more than 0.6% in the regular session Thursday. At last check after hours, the shares were off 0.5%.

This will be the last earnings report for Nike CEO Mark Parker. John Donahoe is scheduled to take over the company in January.