Nike will post Q3’17 earnings tomorrow. Despite being a dominant player in the sports apparel industry, the stock underperformed the S&P 500 index last year as it faced increasing competition from Under Armour (basketball shoes) and Adidas (fashion shoes).

In the report tomorrow, following key areas could be looked at to gauge future performance

1) Growth in the N.American Markets

One sore point during Q2’17 was the 4% decline in future orders for the key N.American market. The company has taken various initiatives like redesigning products (basketball category), introducing new innovations (Air VaporMax, ZoomX sole) and investing in enhancing the retail experience (Nike Soho, NikeTown 5th Ave). These initiatives are expected to improve revenues for the region and help regain lost market share.

2) DTC channel growth and its impact on margins

Nike is consciously reducing its dependency on retailers and investing in developing its DTC (Direct to Customer) sales channel (online platform & retail stores). DTC revenues grew 23% YoY for Q2’17. Greater control over the channel gives it higher flexibility in pricing and inventory decisions and helps improve margins.

3) Currency Impact

Overseas markets have been significantly driving it’s growth lately, with most segments clocking double-digit growth on a neutral currency basis. But the rising dollar has been significantly impacting revenues. While it’s total revenues in Q2 grew 8% on a neutral currency basis, growth dropped to 6% on a constant currency basis. Going forward, currency headwinds are expected to continue and may impact future growth forecasts.

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