Golden “Rio” Quarter For Nike But Future Orders Disappoint – Selling Favourable

Shares of Nike Inc. dropped in the after-hours trading session on Tuesday after the world’s largest athletic gear maker reported earnings and revenues that topped forecasts  coupled with a slowdown in future orders growth.

The Rio Summer Olympics helped give Nike’s sales a boost. The company reported that sales for the fiscal first quarter rose 7.7% to $9.06 billion, beating the average analyst estimate of $8.87 billion. Nike’s earnings climbed 5.9% to 73 cents a share, outshining Wall Street’s forecast of 56 cents a share.

However, future orders for delivery in the period from September 2016 through January 2017 rose at a disappointing pace of 5% to $12.3 billion, falling behind the figures from the same period a year ago. Future orders for the same period last year had registered a  9% rate of growth. Meanwhile, inventories jumped 11 percent from the year-ago period to $4.9 billion in the three months ended Aug. 31.

Nike finance chief Andy Campion said on Tuesday that Nike would no longer report future orders in its quarterly earnings news releases, as the athletic apparel company is aiming to sell those products directly to consumers, instead of sellling through wholesale partners.

Nike recorded consistent sales growth across the board, with double-digit gains in foreign markets including China, Japan and Western Europe. Nonetheless, sales in North America, which comprises the lion’s share of Nike’s business, were only up 6%, due to increasing competition from rivals Under Armour Inc. and Adidas AG. Both companies are grabbing market share from Nike in crucial categories such as basketball and casual footwear.

Technical Analysis

nike

Fig: NIKE D1 Technical Chart

Nike has rebounded to trade above the 23.6% retracement level at 55.25. But a downfall in after-market trading may create a big gap down on the market open today and depress the price back below this level. The next support at 53.10 is within sight and may be tested. The market setup currently looks bearish as the RSI has dropped below 50 and is headed towards the oversold territory, while the price action has broken through both MA’s from above and both MA’s placed overhead are exerting downward pressure.

Trade suggestion

Sell Stop at 53.76, Take profit at 53.10, Stop loss at 54.75

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