Whatâs Going On Here?Nike announced quarterly results late on Tuesday that dunked on investorsâ expectations, and the sportswear giantâs shares initially sprang up 9% on Wednesday. What Does This Mean?Nikeâs quarterly revenue mightâve been slightly lower than the same time last year, but it wiped the floor with investorsâ forecasts, and its profit â which rose versus last year â did too. Just as Nike predicted back in March, sales in China and Europe climbed in line with the post-pandemic recovery, but those in North America â Nikeâs biggest market â werenât in such good shape.
Nikeâs outrageous three-pointer last quarter came from ecommerce, with online sales up 82% on the same time last year (tweet this). No surprises there: itâs been investing in its website and apps, transforming smaller stores into collection hubs, and picking up customers who were avoiding malls like the â well, you know. Oh, and that means ecommerce now represents a third of its overall sales â a target the sports brand didnât expect to hit till 2023. Why Should I Care?For markets: Nike's got competition.
Nike also forecasted itâll grow its annual revenue by âhigh single digitsâ â so 7-9%, up from its June prediction of, well, 0%. That so-called âbeat and raiseâ doesnât just help explain why Nikeâs stock rose, but its rivalsâ too: Under Armourâs shares were initially up 6%, while Europeâs Adidas and Puma jumped 5%. They havenât even given their updates yet, but investors probably think a positive update for Nike bodes well for other sports brands.
Zooming in: Just do it yourself.
Ecommerce could be a game-changer for Nikeâs earnings: it enables the sportswear brand to sell directly to consumers (DTC), rather than through third-party retailers that take a cut. And while an online DTC business does come with extra costs like warehousing, shipping, and returns, that wonât matter if it has enough sales: increased profitability will allow it to reinvest in the business, not to mention repay shareholders via higher dividends and share buybacks. | 