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Nike sales not as bad as feared - auguring well for JD but not Frasers

After closures in the early months of the coronavirus pandemic, nearly all of the company’s physical stores were open during the quarter across North America, EMEA and Greater China

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Nike Inc (NYSE:NKE) shares are expected to sprint higher on Wednesday after quarterly revenues fell far less than expected. 

Sportswear sales of US$10.6bn for the quarter to August 31 were down 1% on this time last year, compared to consensus forecasts from Wall Street analysts of around a 14% decline.

Diluted earnings per share of US$0.95 were up 10% year-on-year and well ahead of the Street’s US$0.47 average estimate.  

This first-quarter performance was also a good comeback from the preceding quarter ended May 31, when Nike’s sales plunged 38% and it posted a net loss of US$790mln.

Chief executive officer John Donahoe said the performance was helped by strong online sales growth of Nike brand product of 82%, offset by lower revenue in the wholesale business and Nike-owned stores.

Revenues for Converse of US$563mln, were up 2%, mainly driven by strong demand in Europe and in digital around the world.

After closures in the early months of the coronavirus pandemic, nearly all of the company’s physical stores were open during the quarter across North America, EMEA and Greater China with roughly 90% open in the Asia Pacific and Latin America.

“In this dynamic environment, no one can match our pace of launching an innovative product and our brand’s deep connection to consumers,” Donahoe boasted.

Nike's stock price closed at US$116.87 overnight, up by a third over the past 12 months.

READ: Mike vs Nike - is Sports Direct shortage reason to panic for Ashley's Frasers?

Analysts at London broker Peel Hunt noted that much of the conference call was taken up with rhetoric about direct-to-consumer channels but that Nike also “called out the importance of a ‘smaller group of strategic partners’.”

“The big brands know that a multi-branded store/website is what most shoppers enjoy most and whilst some retailers will find it increasingly hard to source major product launches, the need for key retail relationships remains.”

The analysts said JD Sports Fashion PLC (LON:JD.) has “forged a strong position for itself”, while Frasers Group PLC’s (LON:FRAS) Sports Direct chain was still suffering from “lowly levels” of Nike stock a fortnight ago.

“With Christmas purchases looking likely to start earlier than ever, this increasingly becomes an issue.”

Quick facts: NIKE

Price: 128.49 USD

NYSE:NKE
Market: NYSE
Market Cap: $201.71 billion
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