Strong Dollar, Weak Nike (NYSE:NKE) Earnings!

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By Thomas Copeland on September 22, 2014 Company

Nike’s (NYSE:NKE) financial results are a picture perfect example of how the corporate earnings all across the board would be hampered due to the dollar rallying in the money market. Profits would naturally be constricted and companies already struggling could go into a crisis due to the dollars strong position.

Looking at the stock market we see that it ended on a higher note as compared to the last week, and hit an all time high, due to the high level of activity this season. Ali Baba (NYSE:BABA) hitting the stock market for the first time, Apple (NASDAQ:AAPL) launching its much awaited products, all in all it was a very good week for the stocks.

The Dow Jones industrial average rose 1.7% and the standard and poors 500 index finished gaining 1.3% along with the NASDAQ composite index increasing 0.3%. On the political front things remained in the status quo and hence low volatility had positive results. The Federal Reserve assured that the interest rates would not be rising anytime soon and the United Kingdom would continue with Scotland under their wing.

This Thursday Nike (NYSE:NKE) reported earnings the very first time this season, being the very first company from the Dow 30 Industrials to be doing so well as to report earnings. You can get a pretty good idea of how the global market is doing when Nike (NYSE:NKE) reports positive earnings. Being an optional luxury item, if consumers are purchasing it in hoards, then the global economy is in good shape.

That however is the situation right now, in the coming quarters; the dollar which is getting stronger will be posing a much greater challenge to corporations in reducing their profit margins. Having gained a total of 6% in the last three months, the dollar index tracks it against six currencies; this is forewarning for corporations who deal in the luxury sector that belts need to be tightened in the coming year…

The earnings reported by Nike (NYSE:NKE) are of course due to the fact that the strong dollar hasn’t started their strong momentum of the past few quarters. Also, the analysts at Nike (NYSE:NKE) were expecting a slowdown in growth since this March. Last quarter the consumer discretionary sector earnings were due to decline only a minute 0.4%, however just a quarter has passed and this figure has increased to a staggering 5.4%. This only goes to show that every quarter would bring worse news where earning growth is concerned.

This was majorly due to the company PulteGroup Inc. (NYSE:PHM) which had a tax asset valuation done this quarter last year. If you take out this loss by PulteGroup (NYSE:PHM) the consumer discretionary sector, which includes Nike (NYSE:NKE), still only has an expected gain of earnings which are around 2.3%. Of all the reported earnings of every sector, this clearly has the lowest growth in its earnings. However, Technology and Consumer Staples are excluded from this analysis.

Other companies besides Nike (NYSE:NKE) would be reporting their earnings the coming week starting Monday till Thursday.