Nike Inc. (NYSE:NKE) released fiscal third-quarter 2017 results Tuesday after the market closed. The athletic footwear and apparel juggernaut came in just below Wall Street's prediction for top-line growth, and offered an underwhelming look ahead. But Nike also managed to increase earnings at a healthy clip, bucking expectations for a year-over-year decline.
Let's dive deeper to see what drove Nike's business over the last three months, and what to expect.
Nike's new KD9 Elite Shoe Line.

Nike's new KD9 Elite Shoe Line. Image source: Nike.

Nike results: The raw numbers 


Fiscal Q3 2017

Fiscal Q3 2016

Year-Over-Year Growth


$8.432 billion

$8.032 billion


Net income

$1.141 billion

$950 million


Earnings per share (diluted)




Data source: Nike Inc.

What happened with Nike this quarter?

  • Revenue climbed 7% on a constant currency basis.
  • For perspective -- and though we don't usually pay close attention to Wall Street's demands -- analysts' consensus estimates called for lower earnings of $0.53 per share, and slightly higher revenue of $8.47 billion.
  • Revenue growth was driven primarily by strength in Nike Brand sales (up 7% at constant currency, to $7.923 billion), thanks to double-digit growth in Western Europe, Greater China, and Emerging Markets. Converse revenue also climbed 3% at constant currency, to $498 million.
  • Revenue in North America rose just 3%, to $3.782 billion, including 3% constant currency growth in footwear, to $2.49 billion, 3% growth in apparel, to $1.154 billion, and a 16% decline in equipment revenue, to $138 million.
  • Nike repurchased 8.9 million shares for roughly $475 million during the quarter, through its four-year $12 billion buyback authorized in November 2015. As of Feb. 28, 2017, Nike had repurchased a total of 64.9 million shares for $3.6 billion.
  • Inventories climbed 7% year over year, to $4.9 billion.
  • Nike ended the quarter with $6.2 billion in cash and short-term investments, up $1.1 billion year over year.

What management had to say

"The power of NIKE's diverse, global portfolio delivered another solid quarter of growth and profitability," added Nike chairman and CEO, Mark Parker. "To expand our leadership and ignite NIKE's next phase of growth, we're delivering a relentless flow of innovation through performance and style, increasing speed throughout the business and creating more direct connections with consumers leveraging digital and membership."

During the subsequent conference call, Parker elaborated:

The consumer has decided digital isn't just a part of the shopping experience. Digital is the foundation of it. This and other factors have shifted consumer patterns -- especially in North America -- impacting traffic, the economics of brick-and-mortar retail, and driving a more promotional environment in the near term. While we are mindful of these near-term dynamics, we remain focused on the long term. The current backdrop represents a tremendous opportunity for NIKE, because the brands that win are going to be the ones that have been out in front with digital and leading with service.

Looking forward

Nike Brand futures are down 4% as reported from the same year-ago period, and down 1% at constant currency. But to be fair, during the call Nike CFO Andy Campion reiterated his past assertion that "futures are an important part of our operating model, but futures growth is no longer a reliable proxy for revenue growth based upon several factors we've previously articulated."

More specifically, recall that direct-to-consumer revenue is reported based on the full retail price to consumers, while futures are reported on a wholesale basis. In addition, Converse, Hurley, and Nike Golf are not included in futures.

As such, Nike expects reported revenue in the fiscal fourth-quarter 2017 to increase in the mid-single-digit percentage range, or slightly below revenue growth in fiscal Q3. But this is also below the 7.4% growth for which investors were looking. On a constant currency basis, revenue should increase in the high single digits.

Nike is doing an admirable job delivering earnings growth and returning capital to investors in this difficult retail environment. But given its top-line underperformance -- at least relative to the market's expectations -- it's no surprise to see shares pulling back.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.