Nike's Stronger-Than-Expected Update

Nike's Stronger-Than-Expected Update

over 3 years ago2 mins

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Nike announced quarterly results late on Tuesday that dunked on investors’ expectations, and the sportswear giant’s shares initially sprang up 9% on Wednesday 👟

What does this mean?

Nike’s quarterly revenue might’ve been slightly lower than the same time last year, but it wiped the floor with investors’ forecasts, and its profit – which rose versus last year – did too. Just as Nike predicted back in March, sales in China and Europe climbed in line with the post-pandemic recovery, but those in North America – Nike’s biggest market – weren’t in such good shape.

Nike’s outrageous three-pointer last quarter came from ecommerce, with online sales up 82% on the same time last year 🏀 No surprises there: it’s been investing in its website and apps, transforming smaller stores into collection hubs, and picking up customers who were avoiding malls like the – well, you know. Oh, and that means ecommerce now represents a third of its overall sales – a target the sports brand didn’t expect to hit till 2023.

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Why should I care?

Nike also forecasted it’ll grow its annual revenue by “high single digits” – so 7-9%, up from its June prediction of, well, 0% 📈 That so-called “beat and raise” doesn’t just help explain why Nike’s stock rose, but its rivals’ too: Under Armour’s shares were initially up 6%, while Europe’s Adidas and Puma jumped 5%. They haven’t even given their updates yet, but investors probably think a positive update for Nike bodes well for other sports brands.

Ecommerce could be a game-changer for Nike’s earnings: it enables the sportswear brand to sell directly to consumers (DTC), rather than through third-party retailers that take a cut 💵 And while an online DTC business does come with extra costs like warehousing, shipping, and returns, that won’t matter if it has enough sales: increased profitability will allow it to reinvest in the business, not to mention repay shareholders via higher dividends and share buybacks.

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