Nike stock plunges 10% on margin fears despite Q2 earnings beat

Investing.com -- Nike (NYSE: NKE) reported Thursday better-than-expected fiscal second-quarter results as stronger sales in its North America business helped offset weakness in China at time when U.S. tariffs are raising input costs, eating into margins.

Gross margin, however, decreased 300 basis points to 40.6%, driven by rising promotional activity to clear excess inventory, particularly in North America, and higher tariffs in North America.

Jefferies analyst James Grzinic said that "the market seems underwhelmed by the scale of sales acceleration and moderation of gm pressures to come in the months ahead."

Nike (NYSE: NKE) was down 10% in pre-market U.S. trade following the report.

For Q2, Nike reported earnings per share of $0.53 on revenue of $12.43 billion. Analysts polled by Investing.com anticipated EPS of $0.37 on revenue of $12.2B.

The beat on revenue was supported by growth in North America, with sales up 9% to $5.6B in Q2 from a year earlier, beating analyst estimates of $5.9B. China, however, was a weak spot with sales down 17% to $1.42B, missing estimates of $1.6B.

Inventories fell 3% to $7.7B.

You May Also Be Interested In

• Nike (NKE) call put ratio 2.1 calls to 1 put with a focus on October 2 weekly 36 calls into quarter results
• Lagarde says moderate ECB policy response remains appropriate
• Jefferies Financial Group (JEF) call put ratio 1 call to 1 put into quarter results