* Reports Q2 2020 results on Thursday, December 19 after the close
* Revenue expectation: $ 10.08 billion
* EPS expectation: $ 0.58
Nike (NYSE 🙂 shares increased by 33% in 2019, despite continuing concerns about global trade and economic slowdown, a performance suggesting that the sportswear giant is doing many things well. The turbo-charged rally of the stock will stand a big test tomorrow when the company releases its fiscal second quarter of 2020.
So far, there is little cause for concern about how Nike is following its growth strategy. At the forefront of the company's efforts is the & # 39; Triple Double Strategy & # 39 ;, which means that the resources for its digital properties must be doubled; accelerate innovation and product creation; and deepening of one-to-one connections.
The difference between Nike and its competitors is that the company has built a strong track record in realizing its strategy. Nike has estimated quarterly earnings over 90% of the time in a period when online disruptors such as Amazon.com Inc. (NASDAQ 🙂 have won a large share of consumer spending.
The Nike brand has become a powerful, statement name, whose sports shoes and clothing ranges are now worn everywhere, and not just in the gym or on the football field. As a result, Nike is gaining a larger market share from its largest European rival, Adidas (OTC :), even in its home market, while performing better in Asia's major growth markets.
Increasing online sales
Nike, for example, showed in its latest earnings report that sales in China increased by 27%, excluding currency effects, despite the escalating trade war that would technically hit American brands hard in the communist nation.
From now on the big question is how quickly a company that sells shoes and clothing can grow. With a record high of $ 100.17 on Tuesday, before closing at $ 99.65, Nike shares are traded at around 29 times the expected profit, which is very similar to around 19 for the broader.
To justify that appreciation, Nike will have to prove that his series of extremely positive revenues will continue and that he has everything to gain further market share.
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% increase in the last fiscal year. In the first quarter they expanded across all regions, with North America gaining 30%, Europe, the Middle East and Africa seeing double digit growth, with Asia Pacific and Latin America 50%. and China with more than 70%.
Nike is committed to conquering women's affairs is another area where it succeeds. In the previous earnings report, Nike recorded strong sales to women and reported double growth in that category.
When assessing the company's greatest long-term opportunities, Chief Financial Officer Andy Campion mentioned women first, followed by clothing, digitally and internationally. Many analysts believe that these initiatives and strategic investments, especially in digital, should help Nike's evolution to produce sustainable, high-rate, single-digit growth and margin expansion.
Bottom Line
The power of the company's gross margins shows that Nike's strategic initiatives transform the sportswear giant into a high-margin enterprise. Nike is also a solid dividend-paying stock with a quarterly payout of $ 0.245 after an increase of 11% last month, bringing the return to around 1%. The strong growth momentum and the growing income stream make this share a suitable candidate for buying and keeping it for long-term investors.
