In a world where Amazon (NASDAQ 🙂 kills its competitors, it is difficult to find another consumer company that has consistently exceeded expectations. The sportswear giant, Nike (NYSE 🙂 is certainly one of them.
The company said on Tuesday that it earned $ 0.86 a share that ended last month, crushing analyst estimates. This quarterly earnings per share surpassed even the most bullish estimate of Wall Street by $ 0.13 cents. Turnover increased by 7% compared to a year earlier and increased by 10% after correction for currency fluctuations.
In the past 11 years, Nike has estimated more than 90% of the time for quarterly earnings in a period when online disruptors, such as Amazon, won a large share of consumer spending.
The "Triple Double Strategy" of the company is at the top of this great advantage, which means that resources must be doubled on its digital properties, innovation and product creation must be accelerated and one-to-one connections must be made. deepens.
Many executives use similar language when communicating with shareholders, but when it comes to Nike, there is clear solid progress on the ground to support this. The Nike brand has become a powerful, statement name, whose sneakers and clothing ranges are now worn everywhere, and not just in the gym or on the football field.
Nike wins everywhere
The result of these efforts is that Nike is capturing a larger market share from its biggest European rival, Adidas AG (DE :), even in its home market, while performing better in Asia's major growth markets.
For example, in the latest report, Nike's sales in China increased by 27%, excluding currency effects, despite the escalating trade war that would technically hit American brands hard in the communist country.
An important area where Nike excelled is the online strategy, which helps to save costs, stimulate sales and increase margins. Nike's digital sales increased by 42% compared to a year earlier in the first quarter, following a 35% growth in the last fiscal year. In the first quarter they expanded across all regions, with North America making a 30% gain, Europe, the Middle East and Africa a double-digit increase, Asia Pacific and Latin America with 50 % and China with more than 70%.
Nike maintained its high-year revenue target, but increased its predicted gross margin expansion to 50-75 basis points. It had projected an increase of 50 basis points.
Such a strong report was enough to make Nike shares rise. The stock rose 4.16% yesterday and closed at $ 90.81 after reaching a new record of $ 92.79 during the day. After yesterday's gain, equities have risen by around 24% this year, continuing the spectacular rise that has doubled their value in the last five years.
After this powerful rally, Nike valuations look pretty rich with its stock trading with a price-gain multiple of around 35. That means that a company that makes shoes and t-shirts will have to grow faster than Facebook (NASDAQ) :), or Apple (NASDAQ 🙂 to justify these ratings. However, most analysts do not believe that it is a problem for Nike to achieve that.
Susquehanna analyst, Sam Poser, said:
"Captivating initiatives and strategic investments, especially in digital, reinforce Nike's evolution and should lead to sustainable FX-neutral growth with a high number of figures and margin expansion."
Bottom Line
Nike is a solid dividend-paying stock, with a quarterly payout of $ 0.22 and a return of 1.01%, which could be included in any long-term portfolio to take advantage of the strong growth momentum and growing revenue stream. The strength of the company's gross margin is particularly encouraging. It shows the underlying solidity of Nike's strategic initiatives that transform the sportswear giant into a company with high margins.
