As in the previous quarter, Nike grew more slowly in North America in the second quarter than in the rest of world, where it still has more opportunities to expand. It even picked up steam in the Europe, Middle East and Africa (EMEA) region during the period, in spite of Adidas’ recent recovery there.

Overall, the Nike group booked a hefty 32 percent increase in net income to $1,115 million in the quarter, ended on Nov. 30, on 10 percent higher revenues of $10.33 billion, rising by 9 percent on a constant-currency basis. Sales went up by 10 percent to $9.84 billion for the Nike brand alone, and they jumped by 13 percent in terms of local currencies, driven by key categories such as Sportwear, the Jordan Brand and Running.

Making a strong recovery, Converse generated 13 percent higher revenues of $480 million, up by 15 percent on a currency-neutral basis, with double-digit growth in Asia and Europe. The brand’s operating income surged by 105 percent to $90 million.

The group’s gross margin inched up by 0.2 percentage points to 44.0 percent, below the previous guidance for an increase of 0.50 to 0.75 points, leading the stock price to remain stable in spite of the jump in the group’s overall profitability. In fact, the operating margin (Ebit) of the group rose by only 0.1 percentage points to 10.9 percent, which we can compare with the 14.0 percent margin achieved by the Adidas Group in the latest quarter, while the bottom line benefited from a temporary drop in the tax rate to 10.7 percent from 15 percent due to more favorable stock-based compensation.

Going forward, the management predicted last Thursday that the group’s gross margin will still end up 0.50 to 0.75 percentage points higher for the full year and that revenues will be up by a high single-digit rate in dollars, approaching a low double-digit rate in local currencies.

The sale of Hurley, which has just been completed, will affect the top line by only about one percentage point. The management explained that it wanted to focus on businesses that have the strongest potential for profitable growth.

The Nike brand continued to post increases at the wholesale level globally in the latest quarter, but direct-to-consumer (DTC) sales outperformed, going up by 17 percent, driven by a 38 percent increase for the digital channel. Sales through the Nike app more than doubled and the digital SNKRS platform recorded a strong double-digit increase. Together, they came to account for more than one-third of Nike’s total sales over the internet. They have been introduced in more than 20 countries so far. More than half of the total digital traffic came from registered members in the last quarter, and they are placing higher orders on average.

In particular, last month’s Black Friday promotions generated 70 percent more revenues in North America and 50 percent more in EMEA for Nike. Meanwhile, the Swoosh is working on better connections between online and offline retail operations, particularly in its two new Nike Live stores in California and Japan.

The growing share of DTC in the total revenues helped to boost the gross margin, as did higher average selling prices, offsetting the impact of higher duties on items imported from China into the U.S., strategic investments on the supply chain and foreign exchange headwinds.

The management also indicated that it is starting to benefit from the capabilities introduced through the recent acquisition of Celect for inventory planning and pricing, including discounts; Invertex for sizing and fitting; and Zodiac for measuring consumer engagement and the impact of new offerings. For Single’s Day, Nike shipped products from more than 200 stores, rather than from distribution centers, to cut costs and service customers faster. Nike will be using local feedback for the development of a new classics women’s line due to be launched in the second half of the current financial year.

Nike says it has tripled the revenue growth that is coming from innovations, instead of doubling it as it promised to do at the latest Investor Day. The most successful new entries have included the newest Vaporfly and Next models in performance running, the new cushioning system of the Lebron 17 basketball shoe and the more responsive Kyrie 6 and AlphaDunk. A new Zoom Air platform is in the pipeline for the 2020 Olympics in Tokyo.

The Jordan Brand generated for the first time sales of more than $1 billion on a wholesale-equivalent basis in the quarter.

In the latest quarter, Nike also piloted a new model for the launch of high-heat apparel on its SNKRS app, where it is enjoying strong sell-through for collaborations.

Nike’s global apparel revenues grew by 10 percent in the quarter, outperforming footwear’s growth in EMEA but rising by only one percent in North America. The brand’s women’s apparel business grew faster in the region than in any other market.

As in the previous quarter, Nike’s growth was led by its operations outside North America, whose sales went up by 18 percent. Greater China was still the stand-out with an increase of 23 percent in local currencies, in spite of the turmoil in Hong Kong, the disparaging comments against the NBA and the trade dispute with the U.S. Digital sales went up by more than 44 percent in China, and the already high regional Ebit margin jumped by a further 1.3 percentage points.

According to the management, the Nike brand “is on fire” and continues to take significant market share in EMEA, where sales grew by 14 percent in local currencies, driven by Sportswear and Jordan and by a 27 percent increase through the digital channel. The Nike brand became the leader in footwear in Germany, said the management, crediting its increasingly localized approach. A connected inventory pilot with Zalando has now being extended from Germany to six other countries.

In North America, where Nike continues to reduce the number of wholesale accounts, sales went up by just 5 percent and the operating margin declined by 1.4 percentage points, but digital sales jumped by 32 percent. In New York, more than 50 percent of the brand’s business is DTC, with a digital penetration of over 30 percent.

The 18 percent sales increase in Asia/Pacific and Latin America was fueled by strong growth in Korea and Japan, where the general sporting goods market has not been buoyant lately. Digital sales grew by 67 percent in these parts of the world, where the Nike brand has struck new partnerships with Zozotown and Flipkart.

“We’re focused, we’re competitive and we’re creating a future of our own design,” said Mark Parker in the last conference call that he has hosted as chairman, president and chief executive of the group. The CEO role, which he has held for 14 years, will be transferred to John Donahoe in 2020 as part of a planned transition, but he will remain connected as executive chairman, leading the group’s board of directors.