Nike shares rise because the sneaker maker’s on-line progress from pandemic fuels positively impacts annual gross sales prospects
Nike reported quarterly sales and earnings on Friday that exceeded analyst estimates. This is due to triple-digit online growth in North America and strong Chinese consumer demand for sneakers and workout clothing.
Due to the pandemic, costs have been reduced as less was spent on marketing at sporting events. The lower costs increased profitability. Strong sales during Alibaba’s Single’s Day in China and Black Friday in the US also contributed to inventory levels rising with tighter inventories, reducing the need for discounts.
“These are the times when strong brands are getting stronger,” said CEO John Donahoe during a conference call on the results. “Constant changes in the direction of digital, sporty clothing as well as health and wellness continue to offer us incredible opportunities.”
With this momentum, Nike raised its outlook for fiscal year 2021, calling for revenue to grow to a low percentage of teenagers year on year. According to Refinitiv, analysts had called for growth of 12.3%. Donahoe said Nike’s earnings outlook is also improving as fewer discounts are planned in the coming quarters.
Its stocks jumped more than 5% in over-the-counter trading.
Here’s how the company performed in the second quarter of the fiscal year compared to analyst expectations based on refinitive data:
- Earnings per share: 78 cents versus 62 cents, expected
- Revenue: $ 11.24 billion versus $ 10.56 billion expected
For the three-month period ended November 30, Nike reported net income of $ 1.25 billion, or 78 cents per share, compared to $ 1.12 billion, or 70 cents per share, last year. Analysts had demanded a profit of 68 cents per share.
Revenue increased 9% year over year to $ 11.24 billion from $ 10.33 billion last year. That was better than what analysts had expected to be $ 10.56 billion.
According to Nike, digital sales for its eponymous brand rose 84% in the quarter as more shoppers visited the site to purchase sportswear and shoes to help maintain their fitness routines and personal health during the pandemic. This has helped to compensate for declines in wholesale partners and in the company’s own brick and mortar stores, as the global health crisis made fewer people feel good when they left their homes to shop.
Even before the pandemic, Nike was shifting its investments to its own stores, websites and key wholesale partners, reducing the need for other retail partners.
“We’ll be more aggressive in adjusting our plans,” Donahoe told wholesalers on Friday. “As we look forward to the future, we will be more aggressive with larger … customers we have worked with, and we work closely with our strategic wholesale partners on city by city, mall by mall, street by street, to determine together how we will regain this demand. “
Sales for the Converse brand, owned by Nike, declined 1% in the second quarter. According to Nike, the women’s category has grown faster than business as a whole, thanks to the introduction of new yoga gear and plus sizes.
In Greater China, Nike sales grew 24%, compared to just 1% year-over-year growth in North America.
With domestic turf sales stagnating, Nike has doubled in the Chinese market, viewing the region as a key growth opportunity for the brand. Over the summer, a new type of store called Nike Rise opened in a mall in Guangzhou, hosting local meetups for mobile app users.
According to Nike, more than 4 million new customers bought their products during Singles Day, a shopping event hosted by Chinese e-commerce giant Alibaba. Overall, Nike achieved online sales of over half a billion dollars on Singles Day on November 11th.
The retailer also said it had record online sales during the week of Black Friday in the US but did not disclose the exact amount.
“Our ability to digitally reach consumers in a variety of ways is getting better and better as the pandemic progresses,” Donahoe told analysts.
Nike stands alongside Lululemon, Dick’s Sporting Goods, and other retailers selling exercise gear and exercise equipment that have recovered faster this year. Other clothing retailers, particularly those dealing in workwear and dresses, have struggled through the crisis. A number, like J.Crew and Brooks Brothers, have filed for bankruptcy.
Still, pedestrian traffic at Nike stores in North America, Europe and Latin America remains declining year over year, partly due to social distancing measures, the company said. However, customers who go to stores are more likely to buy, which increases overall conversion rates. Ninety percent of Nike stores are currently open, but some operate at reduced hours.
“We believe we are better positioned at this point to manage the uncertainty than we were before the pandemic,” said CFO Matt Friend. “We have learned so much in the past nine months.”
At the close of the market on Friday, Nike shares were up more than 37% this year. The company has a market capitalization of $ 215.5 billion.
The full press release on Nike’s earnings can be found here.