Nike Guidance Is Here, And It's Not As Bad As We Thought

Q4 In Review

Nikic highlighted six aspects of Nike's earnings report that were positive, including:

1. Initial reaction to VaporMax adds credibility moving forward.
2. Acceleration of international segments in the quarter.
3. Improvement in Futures from three months ago.
4. Stabilization in the non-Jordan basketball category after months of declines.
5. Inventories grew at the slowest rate in nearly four years.
6. Confidence in management's recent "trip-double" plan was reaffirmed.

But the analyst also noted six concerning aspects of the quarter:

1. An EPS beat accompanied with gross profit growth deceleration.
2. Worsening of North American Futures.
3. Sales need to accelerate meaningfully to achieve guidance.
4. Every product category decelerated last year (except the "Other" category).
5. The online channel is showing signs of materially decelerating.
6. Gross margins on a constant-FX basis declined 50 basis points or more every quarter in fiscal 2017.

2018 Guidance

Heading into Thursday's earnings report, Nike's fiscal 2018 guidance was one of the primary sources of "investor trepidation," Nikic continued. But once the company guided its sales growth to be a mid-to-high single digit it was deemed to be "less bad versus expectations," although it does seem to be weighted to the back half of the fiscal year.

A gross margin guidance of down as much as 50 basis points is also "not as bad as feared" when considering a significant drag as foreign exchange hedges roll over. But excluding foreign exchange rates the company would see a gain of 30–50 basis points, which is more than its long-term plan.

Bottom line, the bull versus bear debate surrounding Nike's stock will continue and shares could be range-bound for the time being.

At time of publication, Nike was up 8.28 percent at $57.57.