After suffering more than a year of quarterly sales declines in North America, Nike Inc. appears to be bouncing back.
On June 28, Nike posted a 3% jump in fiscal fourth-quarter sales in the region, its largest market. The company said it expects that momentum to continue into its next fiscal year. That news generated a positive response from analysts, who said they feel the athletic footwear and apparel maker is back on solid ground.
"Nike has been telling us the downturn in North America was temporary," Morningstar analyst R.J. Hottovy said in an interview. "They really needed to prove that this quarter, and they did."
For the last year, Nike has culled the number of retailers that sell the company's products. At the same time, Nike has pushed its full-price merchandise online and in its own retail stores, boosting margin by cutting out the middleman and reducing promotional sales.
Investors were "highly skeptical" of Nike's success with this strategy a year ago, Barclays analysts said in a note distributed to clients June 29. The Barclays analysts now believe Nike's "story is officially back at this point."
Moody's analyst Mike Zuccaro voiced a similar view in a note distributed to clients June 28. He said that Nike's better-than-expected results are "an indication that its brand remains strong and its consumer direct offense growth strategies are working."
Nike shares jumped 11.1% to close at $79.68 on Friday.
Nike's fiscal fourth-quarter results suggest that the bulk of the malaise in Nike's North American sales came from Nike's troubled retail partners, said Chris Svezia, a Wedbush Securities analyst, in an interview.
"That's going to be key," he said. "If Nike can keep this up while brick-and-mortar retailers go through the shifts that are happening in their industry, Nike products are going to continue to sell and be just fine."
Nike's North American win comes as the company deals with a different issue — this time in its C-suite instead of its shelves. Several top-ranking Nike executives, including Nike brand President Trevor Edwards, who was widely thought to be the next CEO of the company, announced that they would leave the company amid an investigation into workplace behavior and culture earlier in the year, according to reports by The Wall Street Journal.
Nike executives made no mention of the departures during a June 28 analyst call following the release of fiscal fourth-quarter results, and no analyst asked about the departures.
In an interview, Nike spokeswoman Ilana Finley declined to comment on the investigation or a succession plan for the chief executive position and referred to the company's previous statements in March. At that time, Nike said CEO and President Mark Parker would remain in his positions beyond 2020 and that Edwards would serve as an adviser until he leaves the company in August.