Nike Inc. (NKE) - Get Report shares traded at an all-time high Wednesday after the world's biggest sportswear group blasted Wall Street's first quarter earnings forecasts thanks to a surge in online sales.
Nike said earnings for the three months ending in August, the group's fiscal first quarter, were pegged at 95 cents per share, or $1.52 billion, a 10% increase from the same period last year. Overall revenues, Nike said, fell 1% from last year to $10.6 billion, but digital sales surged 82% and now comprise around a third of the overall total, a figure Nike didn't expect until at least 2023.
Looking into the whole of its 2021 fiscal year, Nike said it sees revenues rising in the "high single-digits to low double-digit" range, a much better forecast than the prevailing Street forecast of a 6% growth rate.
"I continue to be excited by the opportunity I see for Nike in digital. We know the digital is a new normal. The consumer today is digitally grounded and simply will not revert back. Our Nike digital business is already meeting our mix goal of 30%, nearly three years ahead of schedule and we will continue to grow from here," CEO John Donahoe told investors on a conference call late Tuesday. "This quarter, our owned digital channel grew 83% on a currency neutral basis, driving almost $900 million of incremental revenue versus the prior year, and an acceleration versus the prior quarter even as our doors at retail reopened."
"Nike's digital transformation strategy is not easily replicated. Simply put, scale matters and NIKE leads and we will continue to lead in this space for all the reasons I've already mentioned. Our size, our incredible product, our brand strength and infinity, the direct consumer relationships we deepen each day and our ability to create seamless and differentiated shopping experiences, that is how we drive continued separation."
Nike shares were marked 9% higher in early trading Wednesday to change hands at $127.36 each, an all-time high that extends the stock's six-month gain to around 105% and value the Beaverton, Oregon-based sportswear group at just under $160 billion.
"Nike's (earnings) beat continues to showcase how the company’s size and scale offers a structural long-term competitive advantage deploying its moat-digging budget across R&D and marketing to go deeper into customers’ wallets, stretching its competitive set from athletic peers, to anyone that sells footwear & apparel, all while improving its direct and wholesale distribution," said BMO Capital Markets analyst Simeon Siegel, who boosted his price target to $134 per share, with an outperform rating, following last night's update.
"Clearly the shares are expensive, but they are expensive for a reason, and we expect them to continue compounding," he added.