Nike just posted yet another impressive quarter, easily besting analysts' estimates on both revenue and earnings per share. But Nike stock fell more than 2% the following day, as futures orders came in light amid currency headwinds.
Shortly after the release, however, Nike management spent roughly an hour with analysts to elaborate on those results. Here are five insights Nike CEO Mark Parker offered during the call:
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1. Nike can keep growing, but it needs to stay on its toes
As an $83 billion business operating on a global scale, Nike has so far managed to effectively juggle that constantly evolving environment of sports with commodities, ever-changing currencies, and political uncertainty. And while I did point out earlier this year that Nike has some leeway to proactively adjust for these changes -- for example, by temporarily reducing the level of receivables in any given market to account for negative currency changes -- it's a still constant battle for Nike to stay ahead of the game.
2. Don't be alarmed by "weak" futures orders
With Parker's first point in mind, investors simply shouldn't panic about this quarter's slightly weaker-than-expected futures orders. First, they're in no way indicative of a problem with Nike's core business. And second, Parker alluded to something about which Nike Brands president Trevor Edwards later reminded investors in the call: that futures orders excluding currencies grew 11%, even though they're approaching the anniversary of the stellar catalystthey experienced in last year's FIFA World Cup. In retrospect, given that year-over-year comparison, it would have been more surprising if Nike's futureshadn'tseemed lighter than usual.
3. E-commerce growth decelerated (and that's OK)
For perspective, three months ago Parker told investors that fiscal Q1 e-commerce sales had not only risen 70% year over year, but that its growth had also accelerated sequentially for each of the past five quarters. Parker's assertion that e-commerce rose 65% year over year this time, then, technically marks an end to that acceleration. But at a certain point that's inevitable, and you'd be hard-pressed to find an investor displeased with 65% growth. In the end, what's really important is that they expect their high-margin e-commerce opportunity to continue expanding for "years" as consumers increasingly shift their shopping habits online.
4. Consumers are still front and center
This is similar to a point Nike management hammered home in past quarters, but there's a huge reason they repeat it again and again: Nike realizes a one-size-fits-all approach isn't the best way to build relationships with consumers. So it created its "category offense," which essentially involves compartmentalizing the focus of its business for each sporting activity, including running, sportswear, basketball, football, men's training, women's training, and action sports. By doing so, Nike can foster a more intimate connection with each consumer, which, in turn, keeps them coming back to the brand over and over.
5. Innovation (at scale) is Nike's single greatest strength
The point here? Many competing athletic apparel companies are perfectly capable of innovating with their products. But Parker insists that Nike sets itself apart given both its ability to do so at massive scale, and to get the world's best athletes to actually use those products. Nike's flyknit boots, for example, could be seen last year on nearly a third of all players participating in the World Cup. What's more, Nike's propensity for regularly signing megadealsto showcase that innovation with top athletic talent serves as a stark reminder of its vast financial resources.
The article 5 Things Nike, Inc.'s CEO Wants You to Know originally appeared on Fool.com.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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