Q4 Performance Outlook: Nike'S Revenue Growth Or Slowdown 6%

It is learned that Nike (NKE.US) will announce its performance in the fourth quarter of 2019 in June 27th. Investors are optimistic about their performance in North America and China. However, Nike management warned that, due to the adverse effects of the exchange rate, its fourth quarter revenue may be weak, and revenue growth may slow down by 6%.

Despite its poor prospects, Nike's stock has been strong, which has risen 2.4% in the past month, while the industry has risen by only 0.9%. In addition, thanks to its good performance, the stock has increased by over 16% in the past year.

The next step is to analyze the growth potential of Nike in key areas of Zacks, thus giving a prediction for its fourth quarter.

Business in North America will continue to grow

Nike's business in North America has resumed growth since last year, and has been doing well so far. Meanwhile, the strong growth of Nike footwear industry is expected to boost the performance of the North American region, driven by the platform of innovation, the strong platform of its own and the cooperation platform of e-commerce. In addition, the growth of sportswear, Jordan (Jordan), Nike (NIKE) children's wear and running products will also contribute to the growth of the region's performance.

In the third quarter of 2019, Nike's wholesale business also improved, Nike's sales in North America increased by 30%, and revenue in the region grew by 7% over the same period last year.

In addition, Nike expects that the growth of the North American market will continue in fiscal year 2019, thanks to the strong push of innovative products, brand awareness and digital channel consumption. At the same time, Nike's differentiated consumer experience in North America should drive growth by launching Nike (NIKE) apps in its own retail stores and testing new services and concepts with retail partners like Foot Locker FL and DICK's sports Goods DKS.

Zacks's general forecast for the fourth quarter revenue in North America was US $4 billion 80 million, an increase of 5.3% over the same period last year.

China's market has greater potential for growth

As sports become increasingly part of the daily life of Chinese consumers, Nike's business development in China is also accelerating. As of now, Nike has achieved two digit revenue growth in China for nineteenth consecutive quarters. In the third quarter of 2019, with the strong performance of Nike Direct, the revenue of Nike Greater China increased by 24% over the same period last year.

It is worth noting that the sales of Nike in China has increased by more than 60% in this quarter over the same period.

Looking ahead, Zacks expects the growth momentum of Nike's China market to continue, which will also support its focus on tailor-made products for Chinese consumers. In addition, Nike is committed to building digital experience and communicating deeply with consumers through China's unique digital ecosystem.

Zacks's general estimate of Nike's fourth quarter revenue in Greater China is US $1 billion 612 million, an increase of 9.8% over the same period.

Profits for three consecutive years

Up to now, Nike has been profitable for three consecutive years. It is worth noting that Nike's performance in the third quarter of 2019 was better than expected in the twenty-seventh quarter, and its eighth consecutive quarter was better than expected quarterly results.

In the future, Nike will continue to seek opportunities to increase global visibility and market share. In addition to acquiring new brands, Nike is still concentrating on expanding its market share through the growth of e-commerce and direct selling business. In addition, sustained growth in North America and the international community will also boost Nike's upcoming quarterly results.

Revenue anticipation

In the last quarter's report, Zacks warned that the headwinds in the foreign exchange market will affect Nike's performance in the fourth quarter of 2019 to some extent. Zacks said that because of the strength of the US dollar, the monetary environment has become unfavourable, which may cause some pressure on the company's performance in the fourth quarter.

Driven by the headwinds of nearly 6 percentage points in the foreign exchange market, Nike expects fourth quarter revenue to be in a low single digit. This increase is much smaller than the 13% increase in the previous quarter. At the same time, the report pointed out that the weak income is also related to the poor performance of the recently launched innovation platform React and Air Max 270, as well as the impact of the world cup.

In addition, the gross profit growth of Nike fourth in the fiscal quarter may be partially offset by higher input costs (including cotton, chemicals and labor), exchange rate risk, and the shift in supply chain investment from the third quarter to the fourth quarter.

Zacks's general estimate of the company's fourth quarter earnings was $0.67, down 2.9% from a year earlier. However, it is estimated that the income of US $10 billion 200 million is 3.7% higher than that of last year.