Nike’s revenue and earnings for the three months ended Nov.30 were above analysts’ estimates, thanks to a strong rebound in sales in China and another spike in digital sales. Nike has raised its fiscal 2021 revenue forecast.
Nike (NKE) shares, up 35.5% YTD, are up 4.75% after the close of trading on Friday as the company announced a rebound in second-quarter earnings growth, after two quarters of declines amid pandemic, store closures and lower consumer spending.
Nike’s earnings per share rose 11% to $ 0.78, beating analyst estimates of $ 0.62. Quarterly profits rose to $ 1.25 billion from $ 1.12 billion a year earlier.
Nike’s revenues rose 8% to $ 11.2 billion, beating the analyst average of $ 10.56 billion. Revenues in the previous two quarters saw a 1% and 38% decline from the same quarter last year. Nike’s quarterly earnings and earnings statistics for the last 2 years are available here.
The company said that strong online sales, 84% higher than last year, contributed to the revenue growth in the second quarter, offsetting losses from falling sales in physical stores. November also saw major sales for Singles Day in China and Black Friday in the US and other countries.
Nike’s digital sales were also strong last quarter, up 82% year-on-year, with a share of the company’s total sales rising to at least 30% – a threshold the company previously planned to reach by 2023.
Speaking of the power of Nike’s digital sales, CEO John Donahue said, “This growth will not always be this steady, but we are increasing market share and taking share from competitors. The digital transformation of consumers is constant and our digital penetration will only grow in the coming years. ”
The largest recovery in sales was seen in the Greater China region, with Nike’s revenues growing 24% compared to just 1% growth in North America.
Nike boosted online sales by over half a billion dollars during the Singles Day sale in China on November 11. During the 2nd quarter, a new store called Nike Rise also opened in the summer in a mall in Guangzhou.
Nike noted that about 90% of all of its physical stores are currently open, although some are on a shorter schedule. In-store traffic is also limited due to quarantine measures in place, although management notes that lower traffic has a higher overall conversion rate, meaning more customers shop by visiting physical Nike stores.
Nike executives also noted that it was making headway in its goal of growing the women’s apparel category, which grew faster than its overall business, with the launch of new yoga gear and plus-size clothing.
Nike has raised its forecast for revenue growth for the full 2021 fiscal year, but did not give specific numbers, analysts predict growth of 12.3%. In late November, Nike announced a 12% increase in its dividend.
“In addition to the short-term challenges of COVID-19, Nike’s strategy to accelerate its digital business – with digital technology accounting for 50% of Nike / partner sales – should continue to drive sales and increase operating margins over the next few years,” said Telsey Advisory Group analyst Joseph Feldman last week. “We therefore see further upside potential for the stock over the next 12 months, driven by relatively strong demand for athletic apparel and footwear and a steady stream of product innovation.”
Wall Street’s valuation of Nike stock looks like a pretty strong “buy” given the lack of a “sell” rating and the high average target price, which is above the current level.