Yahoo Finance Live’s Julie Hyman and Brian Sozzi discuss Nike’s third quarter results.
JULIE HYMAN: But now we have to move on to thing number three, and that’s Nike. And Nike really reassured investors with its report last night, overall sales up 5% to $10.9 billion, and reassuring investors on two fronts which I know you have more details on – a , China is slowing less than expected, and, two, the supply chain.
As we were discussing yesterday with Camilo Lyon, an analyst who covers the stock, the problem with Nike isn’t demand, is it? People want to buy the shoes. The problem with Nike in recent quarters, at least outside of China, has been more supply – can they make enough shoes to meet demand? And there, this neighborhood seemed reassuring here.
So the other trend that I think is really important here is direct-to-consumer revenue. As we have talked about a lot, Nike has changed its model, to some extent. And direct-to-consumer revenue was up 17%, excluding currency effects. And that now accounts for 42% of the company’s total sales. So really, it’s been a big change over the last five years or so, Sozz.
BRIAN SOZZI: Hey, Julie, I mean, with all due respect to Nike, I want another pair of these On sneakers. They are really comfortable like AF. And really, they’re pretty cool. But I note this, sales in China, in your opinion, fell 8%, excluding currency impacts. The street was looking for a drop of around 12%. Some of the whispered numbers were looking for a 15% drop. So check it out, it’s done – no pun intended. Nike nailed it in this regard.
And then, second, you had gross margins up 100 basis points. And that’s very, very impressive, Julie, in a country where you continue to see a lot of bottlenecks in the supply chain. Now the good thing here is – more on that later – Nike noting that all factories are back at full capacity in Vietnam. It’s a big win for them.