Nike investors relieved as 3Q digital sales offset China retail hit from coronavirus

The company’s quarterly results show it’s in excellent financial mint and can endure a challenging period

NIKE - Nike’s investors have less reason to sweat as digital sales offset China retail hit from coronavirus
According to Nike, roughly 80% of the 7,000 stores that sell its products have reopened in China

NIKE Inc (NYSE:NKE) topped revenue estimates in its fiscal third quarter, as strong digital demand offset the first China sales drop in nearly six years from the coronavirus hit.

CEO John Donahoe said on an earnings conference call that NIKE sales plunged when many stores in China closed in February, but demand jumped online. 

“We are seeing the other side of the crisis in China,” said Donahoe. “We now have a playbook we can use elsewhere.”

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For the quarter that ended Feb 29, the shoe and apparel giant posted earnings of $0.78 per share on revenue of $10.1 billion. This handily beat the consensus earnings estimate of $0.54 per share on revenue of $9.9 billion. 

Investors responded well, sending shares nearly 10% higher to $79.49 on Wednesday.

According to NIKE, roughly 80% of the 7,000 stores that sell its products have reopened in China. NIKE recently reopened one of its stores in Wuhan, the city where the outbreak first emerged.

Donahoe said the company is also seeing early momentum in South Korea and Japan, two other countries where the virus prompted temporary store closures.

Donahoe said Nike closed its stores in China immediately after the coronavirus outbreak and doubled down on digital sales as consumers were confined to their homes. The pivot helped Nike accelerate sales through its apps and website. Eventually it reopened stores, foot traffic returned and digital sales remained strong as well.

“We expect the next several weeks to be a challenging period for those living in the U.S. and Europe,” said Donahoe, but the company’s experience in Asia “gives us confidence we will see the other side of this crisis in the near future.”

Revenue in Nike’s North American market, which accounts for the majority of total sales, rose 4.4% to $3.98 billion.

Contact the author Uttara Choudhury at uttara@proactiveinvestors.com

Follow her on Twitter: @UttaraProactive 

Quick facts: NIKE

Price: 126.35 USD

Market: NYSE
Market Cap: $197.09 billion

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