Nike posted its eighth consecutive quarter of double-digit sales growth on Tuesday, adjusted for currency changes, defying the otherwise paltry performance of retailers hurt by warmer-than-usual weather in the U.S. Shares rose by 3 percent in after-hours trading, on top of a 37 percent rise so far this year.
Curiously, shares in Under Armour, which has recently been stealing market share from Nike, are down more than 20 percent in the past three months, trailing Nike and even the broad S&P 500 Apparel index, which is up about 5 percent in that time.
What gives? Doesn't the rising trend of consumers ditching jeans in favor of "athleisure" lift all boats?
Turns out it depends on what you're selling. Nearly two thirds of Nike's sales come from its basketball sneakers and other footwear, which aren't affected by the unseasonably warm winter that has hurt apparel retailers and department stores, according to Bloomberg Intelligence analyst Chen Grazutis.
Meanwhile, Under Armor has almost the opposite makeup: While it has increased sales of footwear, it still brings in more than 70 percent of its revenue from apparel.
What's more, Nike makes a greater share of its money outside of the U.S., compared to smaller Under Armour. It's also increasingly selling its swoosh-emblazoned gear online and through its own stores, lessening reliance on downtrodden department stores such as Macy's and J.C. Penney.
Nike couldn't escape the inventory buildup afflicting other retailers: It reported an 11 percent increase in inventories during the quarter, driven primarily by an 8 percent increase with its wholesale customers (read: struggling department stores). But Nike said orders scheduled for delivery from December through April 2016 were up 15 percent, suggesting the company can sell through that extra inventory.
Even so, Nike shouldn't get too comfortable with recent results. Under Armour may be falling behind this quarter, but weather is fickle. Sales of some of Nike's basketball shoes, such as recent Lebron James models, are slowing. Competitors' shoes made for younger players such as Stephen Curry are gaining in popularity, according to the Wall Street Journal. Nike should keep its eye on the ball.
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