Nike shares surge as online sales increased by 82%

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The FINANCIAL — On Tuesday Nike shares soared by 13 percent in extended trading as the company reported an 82 percent increase in online sales. The company offered up an outlook that calls for demand to grow through the holidays. This is a signal the sportswear giant is making a healthy comeback from the pandemic. NIKE Direct sales were $3.7 billion, up 12 percent on a reported basis, and up 13 percent on a currency-neutral basis, with growth across all geographies.

NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. NIKE has a strong track record of investing to fuel growth and consistently increasing returns to shareholders including 18 consecutive years of increasing dividend payouts. On September 22 company reported fiscal 2021 financial results for its first quarter ended August 31, 2020, according to Business Wire. 

The company reported diluted earnings per share of $0.95 for the three months ended August 31. Revenue was $10.6 billion, down 1% year-over-year. Wall Street analysts had projected earnings per share of $0.47 on revenue of $9.14 billion. Nike’s stock jumped more than 8% in after-hours trading Tuesday following the report. Many footwear and apparel companies, including Nike, were hit by store closures and a decline in in-store shopping earlier in the year. In the quarter ended May 31, Nike posted a net loss and 38% decline in revenue. In the latest quarter, however, Nike said that nearly all of its stores were open, though foot traffic is still lower than usual. Nike’s investments in digital sales significantly boosted sales in the latest quarter, CNN reported. 

Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. said that NIKE is recovering faster based on accelerating brand momentum and digital growth, as well as their relentless focus on normalizing marketplace supply and demand. “We continue to drive investment in capabilities that will fuel our consumer-led digital transformation, catalyzing long-term growth and profitability for NIKE.” – he added.

The brand’s digital sales surged 82% in the first quarter ended Aug. 31, with at least double-digit rises recorded in all regions. In the prior quarter, Nike reported a 75% increase in online sales – nearly a third of total revenue, a goal Nike had previously set for 2023. Nike said it expected fiscal full-year revenue to rise between high single digits and low double digits versus last year, saying second-half sales would be “up significantly,” even though first-half growth would be flat. Analysts forecast a fiscal 2021 sales rise of 5.9%. U.S. retailers including Foot Locker Inc and Dick’s Sporting Goods Inc – which canceled shipments in the early days of the pandemic – have begun making orders for inventory in the second half of Nike’s fiscal year, analysts say, Earnings before interest and taxes rose 18% in North America, Nike’s biggest market, with footwear sales up 11% to nearly $3 billion, Reuters wrote.

Nate Fischer, chief investment strategist at Strategic Wealth Partners, which does not own Nike shares but has the stock on its watchlist, said: “Great quarter, guidance was better than expected, the stock is priced to perfection,” He warned, however, that the stock would be sold off if it misses any quarters coming up.

Like many other retailers, Nike is still limiting the number of people who can come into its stores at once, to try to help curb the spread of the virus. But when people do visit, they’re coming with the intent to buy, and Nike said conversion rates are up. Meantime, Nike’s inventories totaled $6.7 billion at the end of the latest period, up 15% from a year earlier but down 9% from the prior quarter. The company said it “continued to strategically manage excess inventory resulting from a significant number of door closures and lower wholesale shipments globally.” The biggest sneaker-maker in the U.S. has been investing in its website, mobile apps and owned stores, as more consumers are steering clear of department stores and shopping malls. It has been opening sprawling flagship locations in major markets as well as smaller-format shops to serve as pick-up hubs for online orders. Its investments are helping fuel its relative strength compared with other retailers that have been hit hard by the pandemic, according to CNBC.

“Our results this quarter continue to demonstrate NIKE’s full competitive advantage, as we strengthen our position in the midst of disruption,” said John Donahoe, President and CEO, NIKE, Inc. “In this dynamic environment, no one can match our pace of launching innovative product and our Brand’s deep connection to consumers. These strengths, coupled with our digital acceleration, are unlocking NIKE’s long-term market potential.”

It is interesting to note that in July of 2020 Nike’s first-ever chief diversity and inclusion officer, as well as 18-year veteran of Nike Kellie Leonard has stepped down. Felicia Mayo, who joined Nike last year will replace Leonard. In 2018, When Leonard was appointed as Nike’s chief diversity officer, the company was working to change its male-dominated culture after complaints of bullying and sexist behavior by executives. Also, Nike announced a series of senior leadership changes last week supporting the company’s Consumer Direct Acceleration. Read more. 

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