Dive Brief:

• Nike Inc. reported fiscal 2017 first quarter revenue and earnings Wednesday that beat estimates: Q1 revenues rose 8% to $9.1 billion, and excluding currency effects, growth reached 10%. Diluted earnings per share were up 9% to 73 cents per share year-over-year, handily beating expectations. FactSet analysts had expected 56 cents per share on revenue of $8.86 billion. 

• But the Aug. 31 balance sheet reflected an inventory pileup and a slowdown in future orders that spooked investors, with shares falling 4.2% in late trading Tuesday. The company said worldwide future orders rose 7% on currency-neutral basis, missing expectations for 8%. North America future orders rose 1%, missing expectations from analysts for a 5% rise.

• Inventories rose 11% to $4.9 billion from the year-ago period and were driven by a 3% increase in wholesale unit inventories, increases in average product cost per unit, and e-commerce growth.

Dive Insight:

Analysts skeptical of Nike’s summertime report of an inventory draw-down were vindicated by its first quarter report. BR Capital Markets & Co.’s Susan Anderson in July noted that excess inventory was likely hiding at Nike outlet stores and off-price stores like T.J. Maxx. 

"I'm skeptical because we saw a pretty big slowdown in North America last quarter, so for it to flip around so quickly usually does not happen," Anderson said. "There is some inventory build in North America that is going to take a while to work down.”

That inventory build-up and future orders slowdown is likely a reflection of healthy growth at rivals Under Armour and Adidas. Adidas, in particular, is on a warpath, upping its game after years of stumbles, losing market share and eventually forfeiting its second place spot in the sportswear market to Under Armour. Adidas is taking a slightly different approach to Nike with its endorsement deals, opening them up to not only athletes but also creatives like entertainer Kanye West. 

All in all, Nike’s report contained something of a resurgence, thanks in part to the Rio Olympics, which CEO Mark Parker hailed as a success. “Everywhere you looked in Rio, you could feel Nike’s support of the athlete,” he said on a conference call with analysts. “Over 1,500 Olympians from 60 countries won 189 metals wearing our latest innovations. If Nike were a country, we would have stood atop the medal count leaderboard.”

Nike's growth has been bolstered by the altheisure trend, despite signals that it is reaching a saturation point — even its innovator, Lululemon is preparing for the trend to slow. But Parker noted that the competition and appeal of the category remains strong.

“[T]he look of sport continues to influence everyday style around the world. As a result, new brands are entering into the athletic landscape," he said. "The activewear market continues to outpace the overall apparel and footwear market, which itself continues to outpace global GDP growth. It’s a great time to be in the business of sports and as the market leader, this is a great time to be Nike.”