It is by no means an easy task for a sports brand to overcome the challenges of the global health crisis. Massive lockdowns, cancellation of sporting events and a sharp economic downturn created a perfect storm for retailers. But Nike's (NYSE 🙂 earnings report, released Tuesday, shows that it's not the same for all retailers.
The largest sportswear company in the world returned to profit in its tax books and posted far better results than analysts had predicted, enabled by surging e-commerce sales. Sales increased to $ 10.6 billion, compared to the consensus estimate of $ 9.11 billion. Digital sales were up 82% in the quarter ended August 31.
The company posted $ 0.95 per share in earnings, surpassing the consensus forecast of $ 0.46. The latest results showed a robust turnaround from the spring quarter, when the sneaker giant's sales plummeted 38% amid store closings.
The biggest surprise in this remarkable comeback was that Nike is emerging stronger from the pandemic thanks to its superior e-commerce operations and successful execution. That means the disruptions caused by the store closings and locks have not hurt the brand's appeal and customers are returning quickly.
"We're growing stronger in the places that matter most," Chief Executive Officer John Donahoe told analysts on a conference call.
"In this dynamic environment, no one can match our pace of launching innovative products and our brand's deep connection with consumers."
During the pandemic, he said, the company gained market share in the Nike and Jordan brands and returned to growth in international markets, including China and Europe.
Nike Stock Hits Record High
Investors were delighted to see that the company is successfully weathering the crisis and that its strategy is working. Nike shares shot to an all-time high during Wednesday trading, surging a whopping 11% to $ 129.57.
They closed at $ 127.11 yesterday, a gain of 8.76% on that day. Shares were up nearly 15% this year up to Tuesday's close.
Nike was one of the first companies to get caught up in the slowdown caused by the coronavirus. The global sportswear giant was forced to close its stores in China – the second largest market after the US – when the COVID-19 pandemic hit that country early this year, jeopardizing sales of the company's largest Asian market.
But the latest results show that Nike & # 39; s recovery in China is accelerating. Sales in China were up 6% in the quarter as the country managed to contain the virus and revive its economic activity. In North America, Nike's largest market, sales were down 2%, but still higher than analysts' forecasts.
Many analysts believe that these initiatives and strategic investments, particularly in digital media, should help Nike regain its full growth potential by fiscal 2021. Morgan Stanley reaffirmed its 'Overweight' rating on Nike as it raised its price target from $ 121 to $ 142.Highlights Nike's commitment to accelerate direct sales, the robust growth of athletic footwear and realigning its operational models.
Barclays is also optimistic about the company's outlook, raising the price target from $ 118 per share to $ 132. The bank said in a recent note:
"NKE remains our top pick as the company 1) continues to accelerate its business transformation and shift to margin-enhancing direct sales, leading with digital penetration, 2) building its physical footprint of a small, highly productive and profitable mono-brand stores, and 3) uses wholesale partnerships with limited capital outlay for its & # 39; Marketplace of the Future & # 39 ;. "
Bottom Line
Nike is one of those companies whose massive investments in technology paid off during the pandemic and transformed its business to become leaner and more profitable. His latest earnings report proves that point.
