Three Things Nike Inc (NKE) Results Proved Wrong

Nike Inc (NYSE:NKE) announced its results for the first quarter recently. The company’s results put into question at least three primary factors. China is a major factor and can play a role of make or break for the corporation in the September quarter results. However, the results of the sportswear suggest that fears about a slowdown in China seem to have been overplayed or unwarranted. The results could also mean that companies like Apple Inc. (NASDAQ:AAPL) will do better in China. The third factor is consumer spending remains strong in the region.

Fears Of Slowdown In China

China appears to be in the transition period to be influenced by consumer spending from an economy that was fueled by big infrastructure projects. As a result, the economy is hitting a rough patch of late. However, the earnings report from Nike Inc (NYSE:NKE) does demonstrate healthy demand for its products. That could be seen from its recent quarterly results for the first quarter.

The sportswear witnessed a 30% YOY sales growth in Greater China suggesting that there was no sign of any slowdown in the economy. Its sales figure of $886 million is slightly more than 10% of the company’s overall revenue of $8.4 billion. It was easily the quickest growing division. But for the currency impact, its sales would have been still higher. For instance, Japan sales advanced 35% while the exchange rate impacted it to just 12% growth only.

Nike Inc (NYSE:NKE)’s profit from Greater China jumped 51% to $330 million as the region is trying to catch up with Western Europe, which witnessed 4% YOY downtick. Currently, North America leads the table in generating profit of $1 billion and advanced 7% YOY. Jefferies analyst, Randall Konik, commented that the company surpassed expectations on every front. He said that even in the regions where there were fears of greatest economic turbulence, the company did well to quell fears on the healthy demand in the choppy macro environments.

Others Can Do Well In China

The results of the sportswear came on the heels of Alibaba Group Holding Co (NYSE:BABA) warning that the slowdown in China might slacken the transaction volume. However, the results indicated that Apple Inc. (NASDAQ:AAPL) and other firms can perform well in China. Only recently, the tech bellwether launched its iPhone 6S and 6S Plus models. The in-store sales of the smartphone has commenced on Friday in different countries including China.

The company’s CEO, Tim Cook, told the media recently that its performance in China, continued to be robust. Though the company does not have the habit of providing mid-quarter updates, Cook said that iPhone activations in July and August have witnessed strong growth. He said that the trend has actually accelerated. Cook said that the company had the best performance for the App State in the year as far as China is concerned. He was responding to questions in respect of the slowdown in China’s economy and the resultant impact on its iPhone sales performance.

Consumer Spending Remains Strong

Two big companies, Nike Inc (NYSE:NKE), as well as, Apple Inc. (NASDAQ:AAPL) have delivered or confirmed robust results from China. That suggests that the consumers are ready to spend on the American products.

The results of the sportswear and the comments from technology bellwether indicated that consumers cannot resist buying the high-profit brands. As a result, high-profile brands can withstand the slowdown in China better than the others. That will make Apple Inc. (NASDAQ:AAPL)’s iPhone 6S and 6S Plus likely to continue to witness strong demand and that it will not have a tough time convincing consumers. The company has also indicated that there was a waiting period of more than week. That indicated that consumers are ready to spend more and shows signs of stability in their economy.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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