Nike Inc. rallied in the final hours of trading after the world’s largest sportswear manufacturer returned to profit and posted much better-than-expected revenue, a sign that it is recovering quickly from the pandemic’s slide.
Revenue totaled $ 10.6 billion in its first fiscal quarter, Nike said Tuesday, compared with analysts’ estimate of $ 9.11 billion. The company posted 95 cents a share in earnings, beating the 46-cent projection.
Investors had been looking for evidence that Nike is navigating the coronavirus crisis, and that is exactly what the company achieved. Now their shift seems to be solidly underway, especially in China and through e-commerce.
CEO John Donahoe said “no one can match our pace” in new product launches, which has been sustained despite disruptions from the health crisis.
“We’re getting stronger in the places that matter most,” the Silicon Valley veteran, who replaced Nike in January, said during a conference call. “We can thrive in this environment.”
Although sales did not grow, falling about 1% from the previous year, Wall Street was preparing for something much worse. Nike also improved its margins more than expected, and direct sales increased 12%.
The shares rose as much as 15% to $ 134 in after-hours trading. They are up 15% this year through closing.
Nike expects revenue growth to range from the high single digits to the low double digits this fiscal year, and gross margins will remain stable.
The generally optimistic results gave a boost to other sportswear companies, including Lululemon Athletica Inc. and Under Armor Inc., which won on extended trade.
Relying less on outside retailers can benefit the Beaverton, Oregon-based company, both during the Covid-19 recovery and in the long term.
They were up 6% in the quarter. The country came out of the lockdowns faster and the government is pressuring citizens to exercise more – a boon for sportswear.
In North America, where the response to the pandemic has had variable success from state to state, sales fell about 2%.
Nike still has excess inventory to handle. Levels are up 15% compared to last year, due to temporary store closures and fewer wholesale shipments to retailers.
Pedestrian traffic to stores also remains low, as customers have been slow to return to malls and shopping streets, although almost all Nike stores have reopened globally. The silver lining: Those who venture into retail are more likely to make a purchase.
