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Nike execs predict Q4 revenue to grow in high single-digit range

Nike Inc. expects revenue growth to continue in its fiscal fourth quarter as its international markets expand and negative North American trends begin to reverse, company executives said March 22 during a conference call with analysts.

Andrew Campion, Nike CFO and executive vice president, said the company anticipates revenue for the fiscal fourth quarter, which ends May 31, to grow in the high single-digit range year over year. Gross margin is expected to be roughly flat to "very slightly" up compared to the year prior, although that will be almost entirely offset by currency exchange rates. The company also expects selling, general and administrative expenses to grow in the low teens year over year, Campion said.

During the conference call, Campion said he anticipates North American fourth-quarter revenue to be roughly flat from the prior-year period, then return to growth in the second half of the 2019 fiscal year. Revenue in North America fell 6% to $3.57 billion in the fiscal third quarter, ended Feb. 28, from $3.78 billion in the year prior. By comparison, third-quarter revenue in greater China rose 24% to $1.34 billion from $1.08 billion year over year.

"We have reset Nike's supply, we're fueling demand through the launch of innovative products, we have reignited brand heat, we're connecting more directly with consumers and orders through our strategic partners are building," he said. "In short, Nike has returned to a pull market in North America."

Campion said the company will invest in digital and memberships, completing the acquisitions of some "key digital capabilities" during the fiscal fourth quarter and investing in marketing and innovation for events including Air Max Day and the World Cup, he said.

For the 2019 full fiscal year, Campion said the company expects revenue growth in the mid-to-high single-digit range.

While the company took a $2 billion hit on the effects of U.S. tax reform in its fiscal third quarter, Campion said the new policies will afford Nike "more efficient access to capital" during the 2019 fiscal year. That increased access to capital will allow the company to complete its four-year $12 billion share repurchase program during fiscal 2019, one year earlier than planned, he said.

The conference call comes about a week after two Nike executives left their positions amid complaints about workplace behavior. One of the executives, Trevor Edwards, was president of the Nike brand and considered a potential successor to the CEO position.

"We became aware of some behavioral issues that are inconsistent with Nike's values of inclusivity, respect and empowerment," said Mark Parker, CEO, chairman and president, during the call. "I'm committed to ensure that we have an environment where every NIKE employee can have a positive experience and reach their full potential."

On March 22, Nike announced its acquisition of Zodiac, a data science company based in New York. On the conference call with analysts, Parker said the acquisition will help Nike develop its digital and membership capabilities.

Campion said Nike is building out its digital capabilities in-house, in addition to Zodiac and "some other teams that we've been in discussion with."

Nike announced its expansion of a pilot program with Inc. during its fiscal second-quarter conference call Dec. 21, 2017. Following the release of fiscal third-quarter earnings March 22, Parker said the partnership, which involves Nike selling a select number of products on Amazon's e-commerce platform, is performing "quite well."

"We've seen good sell-through on a limited selection of products," he said. "We're expanding that selection of products over this next phase."