Sports stock to watch: Nike Inc (NYSE: NKE)

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Nike Inc (NYSE: NKE) stock fell 1.3% in the pre market session of December 20th, 2019 post the second quarter of FY 20 update. Inventories for Nike, Inc. had increased 15% to $6.2 billion, compared to the prior-year period.

However, the company reported 32% rise in the net income to $1.1 billion mainly due to strong revenue growth, gross margin expansion, selling and administrative expense leverage and a lower tax rate. The company had generated cash and equivalents and short-term investments were $3.5 billion, which is $539 million lower than last year as share repurchases, dividends, and investments in infrastructure more than offset proceeds from net income. The company’s gross margin had expanded by 20 basis points in Q2 due to a strong gross pricing margin, was partially offset by the impact of new tariffs implemented in September, strategic supply chain investments and foreign exchange headwinds.

NKE in the second quarter of FY 20 has reported the adjusted earnings per share of 70 cents, while adjusted revenue growth of 10 percent to $10.3 billion in the second quarter of FY 20. Nike Direct rose 17% on a currency-neutral basis in Q2, due to Nike Digital, which grew at 38%. The digital growth was due to the Nike app and SNKRS app with both now live in over 20 countries. In Q2, the company had also opened two Nike Live stores in Long Beach, California and Shibuya, Tokyo.

Moreover, geographically, North America’s sales grew 5.3 percent to $3.98 billion from $3.78 billion. Europe, Middle East & Africa (EMEA)’s sales rose 9.7 percent to $2.54 billion from $2.31 billion. Greater China’s sales grew 19.6 percent to $1.85 billion from $1.54 billion and added 23 percent on a currency-neutral basis. Asia Pacific & Latin America (APLA)’s revenues rose 13.1 percent to $1.47 billion from $1.3 billion.

Additionally, during the second quarter, the company had repurchased 10.1 million shares for approximately $922 million as part of the four-year, $15 billion program approved by the company in June 2018. As of November 30, 2019, the company had repurchased a total of 33.6 million shares under this program for approximately $2.9 billion.

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