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Nike Stock Jumps After Q2 Earnings Beat, Supply Chain Optimism; Direct, Sales Impress

Nike used its developing direct-to-consumer sales, as well as surging north American demand, to offset supply chain disruptions and deliver stronger-than-expected second quarter earnings.

Nike  (NKE) - Get NIKE, Inc. Class B Report shares jumped higher Tuesday after the world's biggest sports apparel company topped Wall Street forecasts for its second quarter earnings, thanks in part to soaring sales in its home north American market.

Covid-linked closures in Vietnam, its key manufacturing hub, kept 130 million product units from hitting the shelves last quarter, the company said, but record Black Friday sales for its digital division helped overall north American revenues rise 12%, to $4.48 billion, offsetting a 20% slump in China sales. 

Revenues from Nike Direct, its consumer-focused division, were up nearly 30% in north America thanks to gains in apparel and equipment. Footwear, Nike said, was essentially flat. 

Overall, Nike earned 83 cents per share -- well ahead of the Street consensus forecast -- on sales of $11.4 billion, while noting it's 'increasingly confident' that supply chain issues will normalize over the first half of the next calendar year, although uncertainty will continue to linger.

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"As we approach the end of the second year of the pandemic, it is becoming even more challenging to compare quarters and fiscal years due to multiple waves of COVID-related disruption at different times, across the consumer marketplace and now supply chain," CFO Matthew Friend told investors on a conference call late Monday. "We expect the operating environment to remain volatile as COVID-variants continue to cause disruption to business operations."

"However, Nike's long-term market opportunity is larger than ever, and so we remain focused on what we can control in the short-term and on where we are heading through our Consumer Direct Acceleration strategy," he added.

Nike shares were marked 7.4% higher in early trading Tuesday to change hands at $167.90 each, a move that would extend the stock's six-month gain to around 30%. 

"Looking forward, we continue to believe Nike’s size and scale represent a competitive advantage to work through what still appears to be transitory issues," said BMO Capital Markets analyst Simeon Siegel, who caries an 'outperform' rating with a $170 price target on the stock.   

"Vietnam factory re-openings are on-plan, as nearly all impacted factories began re-opening in October," he added. "Vietnam factory re-openings are on-plan, as nearly all impacted factories began re-opening in October."