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Why Nike Stock Fell Friday

By Daniel Sparks – Updated Apr 14, 2019 at 8:17PM

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Here's why the stock fell even though its earnings per share were better than expected.

What happened

Shares of footwear giant Nike (NKE 0.24%) took a hit on Friday, falling about 6% as of 12:40 p.m. EDT.

The stock's pullback comes after Nike's fiscal 2019 third-quarter earnings release on Thursday afternoon. Shares are likely down following the report because of the company's weaker-than-expected North America sales growth and softer-than-anticipated guidance for its fiscal fourth-quarter revenue.

A Nike shoe

Image source: Nike.

So what

Driven by strength in the company's Nike Direct channel, or sales at company-owned retail stores and digital commerce, fiscal third-quarter revenue rose 7% year over year to $0.9.6 billion. When adjusting to exclude the impact of foreign exchange rates on currencies, revenue rose 11% year over year.

"The Consumer Direct Offense is delivering broad-based growth across all four of our geographies, led by continued momentum in China," said Nike CFO Andy Campion in the company's third-quarter earnings release.

A deceleration in North America sales growth may have disappointed some investors. Sales in the market increased 7% year over year, down from 9% growth in the prior quarter. 

Check out the latest earnings call transcript for Nike.

Now what

In addition, management's guidance for fiscal fourth-quarter revenue to rise at a rate in the low single-digits may signify a greater deceleration than the Street was anticipating. Nike said it expects about six percentage points of foreign exchange rate headwinds during the quarter. On a constant-currency basis, Nike guided for revenue to rise by a "high single-digit" rate. 

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool recommends Nike. The Motley Fool has a disclosure policy.

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