In this segment from the Motley Fool Money podcast, host Chris Hill and senior Motley Fool analysts Jason Moser, Matt Argersinger, and Ron Gross consider the situation at sneaker and athletic-gear giant Nike (NYSE: NKE), which snapped a yearlong streak of quarterly declines in North American sales this time around, and posted beats in revenue and EPS. The Fools discuss the competitive landscape in this apparel niche, as well as the neighboring athleisure segment.
A full transcript follows the video.
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This video was recorded on June 29, 2018.
Chris Hill: With the World Cup as our backdrop, let's start the week with Nike. For the first time in a year, Nike posted sales growth in North America. That was the highlight of its fourth quarter report. Shares of Nike up big on Friday, and Matty, hitting a new all-time high.
Matt Argersinger: Yeah, all-around awesome result for investors, I would say. Revenue growth of 13%, well above guidance, earnings per share above guidance. Total Nike brand revenue up 14%, particularly strong internationally, with China up 35%. But --
Ron Gross: Trump will take care of that.
Argersinger: [laughs] Of course. It really was about North America. Growth of 3% might not seem like a barn-burning quarter, but if you think about the amount of pessimism out there about sports apparel, I feel like investors probably thought, "It's either going to be flat or down." Nike talked about having growth resurging in the second half, but I think this is earlier than expected. I think a lot of investors are saying, "Hey, I think the trajectory is now up again."
Hill: And to the extent that there's been optimism in sports apparel, it hasn't been with Nike and it hasn't been with Under Armour (NYSE: UA) (NYSE: UAA), it's really been about Adidas lately.
Argersinger: That's right. Speaking of Under Armour, I was surprised that Under Armour was actually down on Friday. I thought there would be some sympathy buying there. But, like you said, Adidas was winning last year, and there's this idea that maybe this is just a bit of a zero-sum game right now.
Gross: Where's the line between sports apparel and athleisure, the pretentious athleisure? Is there a differentiation between the two?
Argersinger: I think there is. I use Lululemon as an example, Lululemon has just been on fire. I think that category feels a little broader than what you'd expect with Nike, which is more performance apparel.
Jason Moser: I think it's going to be really interesting to see how Under Armour reports this coming quarter. I think you're right, it's that return to growth in North America that made the difference for Nike this quarter. That has been a big point of weakness for Under Armour here recently.
But Under Armour has also been hampered by some very self-inflicted wounds, as well. Inventory management was a major problem. Kevin Plank, I think, took a step back, realized he had to bring some leadership into play to help him manage this business and take it to the next level. It's going to be very fascinating to see not only where Under Armour stands in North America, but also, are they working through this inventory snafu and getting the business back in the right direction.
Chris Hill owns shares of Under Armour (A and C Shares). Jason Moser owns shares of Nike and Under Armour (A and C Shares). Matthew Argersinger owns shares of Under Armour (C Shares). Ron Gross owns shares of Nike. The Motley Fool owns shares of and recommends Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool recommends LULU. The Motley Fool has a disclosure policy.