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Nike Surges To Fresh Record High After Online Sales Boost Q2 Profits

Nike rode another 80%-plus gain in online sales, as well as a surge in revenues from China, to post another forecast-beating set of quarterly earnings that look set to propel the stock to fresh all-time highs Monday.

Nike Inc.  (NKE) - Get NIKE, Inc. Class B Report shares surged to an all-time high Monday after the world's biggest sports apparel company posted stronger-than-expected third quarter earnings thanks to the continued surge in online sales.

Nike said earnings for the three months ending in November, the group's fiscal second quarter, were pegged at 78 cents per share, or $1.52 billion, an 11% increase from the same period last year and well ahead of the Street consensus forecast of 62 cents per share. 

Overall revenues, Nike said, rose 9% from last year to $11.2 billion, even as physical store traffic declined amid the global coronavirus pandemic. Digital sales surged 84%, Nike noted, and now comprise more than a third of the overall top line total.

"This holiday season also was highlighted by the record-setting digital sales we saw during Black Friday week, which has shown the power of our digital transformation all over the globe. Digital is now woven into everything we do as a company. It's how we operate and prioritize, from how we engage with members, to how we operate our supply chain, to how we serve consumers in the marketplace," Nike CEO John Donahoe told investors on a conference call late Friday. 

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"As we've said, this growth won't always be so uniform, but we are growing the pie and taking share from competition. This is the sharp point of our strategy. The consumer shift to digital is permanent and our digital penetration will only increase in years to come," he added. "Across the quarter, our innovation pipeline and brand strength positioned us to continue to navigate a dynamic environment with agility. We have a proven playbook, led by digital."

Nike shares were marked 4.65% higher in early trading Monday to change hands at $145.80 each, an all-time high that would extend the stock's six month gain to around 45%.

Revenue from China, Nike's fastest-growing market, rose 24.4% from last year to $2.3 billion, while North American revenues edged 2% higher to just over $4 billion.

"Nike's digital shift enhancing the profitability of the business is playing out in real-time, with NKE posting ~80% digital growth and ~225 bps of operating margin expansion in the quarter," said KeyBanc Capital Markets analyst Matthew DeGulis. "Through digital & China growth, speed initiatives, and marketing expense leverage, we think Nike is in the early stages of a multi-year margin expansion cycle and reiterate our Overweight rating."