Nike shares fell 4.4% to $96.88 in post-market trading. The stock had run up more than 6% in the past two weeks leading into earnings and was trading at a multiple of next year’s earnings of 46 times, well above its 5-year average of 39 times. Investors had looked past Covid-decimated earnings and priced the stock on earnings farther into the future, leaving it vulnerable to a rough earnings report.
Here were the Covid-impacted results versus Wall Street expectations:
- Revenue: $6.3B vs. $7.295B (actual: -38% year-over-year)
- China Rev: $1.65B vs. 1.595B (actual: -3%)
- EPS: -51 cents vs. 9 cents
Nike’s digital sales increased 75%, as consumers around the globe are now adopting e-commerce at higher rates than they were pre-Covid. Nike has one of the best e-commerce businesses out of any consumer company in the world. E-commerce was abut 30% of total revenue.
Selling, general and administrative expense totaled 50% of revenues, up from 33% in the same quarter last year, weighing heavily on the operating margin and total profit dollars.
Nike did not give guidance for the current quarter. Analysts are looking for a smaller contraction in revenue and earnings year-over-year than the reported quarter exhibited. Analysts are looking for EPS of 62 cents and revenue of $9.7 billion.
Here’s what management said of the result:
“In a highly dynamic environment, the NIKE Brand continues to resonate strongly with consumers all over the world as our digital business accelerates in every market,” said John Donahoe, President and Chief Executive Officer, NIKE, Inc. “We are uniquely positioned to grow, and now is the time to build on NIKE's strengths and distinct capabilities. We are continuing to invest in our biggest opportunities, including a more connected digital marketplace, to extend our leadership and fuel long-term growth.”
But here was the glimmer of hope for investors, as told by management: "Retail traffic continues to improve week-over-week with higher conversion rates as compared to the prior year.” The vast majority of global stores are open, with all China stores open.
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