Daily Brief: Nike Rounded Out The Year With A Beat, And Now It’s Taking A Run At The Metaverse

Daily Brief: Nike Rounded Out The Year With A Beat, And Now It’s Taking A Run At The Metaverse

about 2 years ago3 mins

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Nike put its signature swoosh to use earlier this week, as the world’s largest athletic brand crossed “reporting better-than-expected results” off its remaining tasks for the year.

What does this mean?

Nike had a lot on its plate coming into last quarter, including hefty production delays after a Covid outbreak shut its Vietnamese factories – yup, the ones that makes about half of its shoes. That really hurt its Asian sales: in China, for example, Nike brought in 20% less revenue last quarter versus the same time last year.

But don’t feel too sympathetic: Nike still managed to get enough goods to the US to meet strong demand, so revenue in North America – the company’s biggest market – grew by 12% last quarter. Mix in that the athletic giant continued to distance itself from discount-happy wholesale partners – pushing more sales through its own channels instead – and you’ll see how revenue from direct sales grew by 9% last year. All in, then, overall profit jumped by a better-than-expected 7% last quarter versus last year, and investors sent Nike’s shares up 3%.

Nike stock
Source: Google Finance

Why should I care?

The bigger picture: Nike’s ticking off the metaverse.

Looks like Nike wants a run at the fast-growing metaverse: the company announced last week that it had bought virtual sneaker company RTFKT. And since digital goods cost a lot less to make than physical ones, this could signal the start of a highly profitable revenue stream for the company – and one that isn’t affected by supply chain issues either.

Zooming out: China’s losing pace.

Nike’s not the only company seeing lower sales in China: data out last week showed that Chinese retail sales grew by less than expected last month, adding to worries that the world’s second-largest economy is slowing down. But this might help: the country’s central bank cut an important interest rate earlier this week, and since banks use it to price their loans, that could help boost spending and reinvigorate the economy.

China retail sales

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US Chipmaker Micron Reported Better-Than-Expected Results

Micron image

Micron reported better-than-expected earnings earlier this week, as the chipmaker cashed in thanks to a string of fortunate events.

What does this mean?

Micron makes a lot of its money by selling chips to PC manufacturers, so it was positively gleeful last quarter when they upped their orders, spurred on by more availability of other computer parts. The American memory chip maker doesn’t want all its eggs in the PC basket though, so it’s been pushing into other areas like the automotive industry and data centres. That might just be working: its revenue from those segments jumped by 25% and 70% respectively last quarter versus last year. And what’s more, the mix of strong demand and ongoing shortages meant Micron could charge a higher price for its chips, which helped it grow overall revenue by a better-than-expected 33% last quarter versus the same time last year.

Micron v index
Source: The Wall Street Journal, FactSet

Why should I care?

For markets: 2022 is Micron’s year.

Micron needs the boost: its stock was only up 11% so far this year before the results, well behind the 34% rise of an index tracking 30 of the biggest chipmaking firms. But it’s up for the challenge: Micron gave a better-than-expected revenue outlook for this quarter, and it even reckons it can bring in record revenue next year. Investors respected its ambition, and sent Micron’s stock up 9% after the news.

The bigger picture: Chipmakers might be getting ahead of themselves.

Micron’s got big plans: it wants to invest as much as $12 billion into new equipment and plants over the next year. That’s not unusual: a slew of chipmakers have been investing to increase their capacity during the chip shortage, but some analysts have reservations. See, they reckon if the strong demand for chips ends up dropping off – due to an economic slowdown, say – then those chipmakers could find themselves with too many chips. That could send chip prices falling, and do some damage to chipmakers’ bottom lines.



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