Nike reported quarterly sales and earnings on Friday that exceeded analyst estimates. This is due to triple-digit online growth in North America and strong Chinese consumer demand for sneakers and workout clothing.
Due to the pandemic, costs could be reduced as less marketing spending was made at sporting events. The lower costs increased profitability. Strong sales during Alibaba’s Single’s Day in China and Black Friday in the US helped it kick off the holiday season with stock shortages, reducing the need for discounts.
“These are the times when strong brands are getting stronger,” said CEO John Donahoe during a conference call on the results. “Constant changes in the direction of digital, sporty clothing as well as health and wellness continue to offer us incredible opportunities.”
Its stocks jumped more than 4% in trade outside of business hours.
Here’s how the company performed in the second quarter of the fiscal year compared to analyst expectations based on refinitive data:
- Earnings per share: 78 cents versus 62 cents, expected
- Revenue: $ 11.24 billion versus $ 10.56 billion expected
For the three-month period ended November 30, Nike reported net income of $ 1.25 billion, or 78 cents per share, compared to $ 1.12 billion, or 70 cents per share, last year. Analysts had demanded a profit of 68 cents per share.
Revenue increased 9% year over year to $ 11.24 billion from $ 10.33 billion last year. That was better than what analysts had expected to be $ 10.56 billion.
According to Nike, digital sales for its eponymous brand rose 84% in the quarter as more shoppers visited the site to purchase sportswear and shoes to help maintain their fitness routines and personal health during the pandemic. This has helped to compensate for declines in wholesale partners and in the company’s own brick and mortar stores, as the global health crisis made fewer people feel good when they left their homes to shop.
Sales for the Converse brand, owned by Nike, declined 1% in the second quarter. According to Nike, thanks to the introduction of yoga and plus sizes, the women’s category has grown faster than business as a whole.
In Greater China, Nike sales grew 24%, compared to just 1% year-over-year growth in North America.
With domestic turf sales stagnating, Nike has doubled in the Chinese market, viewing the region as a key growth opportunity for the brand. Over the summer, a new type of store called Nike Rise opened in a mall in Guangzhou, hosting local meetups for mobile app users.
According to Nike, more than 4 million new customers bought their products during Singles Day, a shopping event hosted by Chinese e-commerce giant Alibaba. Overall, Nike achieved online sales of over half a billion dollars on Singles Day on November 11th.
The retailer also said it had “record” sales online during the week of Black Friday in the US but did not disclose the amount.
Nike stands alongside Lululemon, Dick’s Sporting Goods, and other retailers selling exercise gear and exercise equipment that have recovered faster this year. Other clothing retailers, especially those that deal with workwear and dresses, have problems.
Still, pedestrian traffic in stores in North America, Europe, and Latin America is down year-over-year due to social distancing measures. However, customers who venture into stores are more likely to buy, which increases conversion rates. Ninety percent of the stores are open, but some have reduced hours.
At the close of the market on Friday, Nike shares were up more than 37% this year. The company has a market capitalization of $ 215.5 billion.
The full press release on Nike’s earnings can be found here.
