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NIKE, Inc. Revenue Grew to 9 Billion but Net Loss Was 912 Million? | Fiscal 2018 Third Quarter Results

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NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2018 third quarter ended February 28, 2018.

Source: NIKE, Inc. Reports Fiscal 2018 Third Quarter Results

The most interesting aspects of today’s report beyond what happened earlier in the day with the sell off of shares by Pershing Square:

Pershing Square Cashes Out with 100 Million Before Nike 3rd Quarter Fiscal 2018 Earnings and Conference Call | via Wall Street Journal

Was the fact that Nike reported a loss for the first time since 2002. This was reported by Sara Germano of WSJ. The thing is this fact isn’t the whole story. Nike’s loss was due to something completely beyond the control of footwear and apparel sales and could be a harbinger of things to come as President Trump begins to enforce trade embargoes and tightens up the Tax Code.

The effective tax rate was 179.5 percent, driven by the Tax Act, which impacted comparability. During the quarter, as a result of enactment of the Tax Act on December 22, 2017, the Company recorded additional income tax expense of $2.0 billion primarily related to the transition tax on our accumulated foreign earnings and the remeasurement of deferred tax assets and liabilities.

179.5 percent!!!!! I had to write this because when you look at the fact that Nike lost 912 Million and posted it’s first loss in over 20 years, that has to be tempered with the fact that Nike’s revenue hit 9 Million in a quarter. If that number is extrapolated over the course of the next four quarters Nike hits 36 Billion a year. This is an increase over the 32-35 Billion the company has seen in the last few years and shows a positive trend.

The thing that was most interesting is that Nike spoke highly of the ship being righted in North America via the CDO and an improvement in an area that has long been seen as a waste of time by analysts, basketball.

Revenues for the NIKE Brand were $8.5 billion, up 4 percent on a currency-neutral basis, driven by Greater China, EMEA and APLA, including double-digit growth in NIKE Direct and growth in Sportswear and NIKE Basketball.

Throughout today’s conference call there was an excitement over this years NBA All Star Weekend which saw a number of digital strategies incorporated successfully which was the reason for the majority of the growth for the brand as digital led the way with double digit growth.

The recent scandal that saw Nike’s number two Trevor Edwards step down didn’t affect the share price at all as Mark Parker beyond 2020. The brand will continue to see a decrease in margins as more Consumer Experiences are implemented. As many brands are utilizing companies like NPD to account for sales data and information to bolster customer acquisition, Nike is building an in-house team to analyze digital data and sales numbers. They spoke of the acquisition of Zodiac as a component of growth vital to improving and learning more about CDO:

“The acquisition of Zodiac demonstrates our commitment to further accelerating Nike’s digital transformation and enhancing our consumer data and analytics capabilities to help us serve consumers globally,” says Adam Sussman, Vice President and Chief Digital Officer of NIKE, Inc. “We’re adding world-class data-science talent and best-in-class tools to power 1:1 relationships with consumers through digital and physical consumer experiences.”

Artem Mariychin, Zodiac CEO, comments, “Nike’s incredible connection with consumers and its global scale make it a perfect home for Zodiac’s team and capabilities. We are excited to become part of Nike to help power the Consumer Direct Offense across the world.”

The Conference Call helped to stave off investor concerns and continued to lay the groundwork for Nike’s upcoming push with digital at the World Cup and NBA Finals. You can use the source link to read more.