Nike gains after e-commerce, China fuel return to growth

Bloomberg

Nike Inc gained in late trading after second-quarter revenue and profit topped Wall Street’s expectations, bolstered by e-commerce sales and rebounding growth in China.
Sales rose 8.9% to $11.2 billion in the quarter ended on November 30, the athleticwear company reported. Analysts had projected $10.6 billion. Earnings grew to 78 cents a share, compared with a 62-cent estimate.
The results provided fresh evidence that Nike is in recovery mode after Covid-19 upended its global operations. Though Nike also beat Wall Street estimates with its previous results in September, sales declined through much of 2020 and resumed their growth trajectory only in the latest period.
After the virus shuttered stores around the world and led to a pileup in inventory, the Beaverton, Oregon-based company has been working through its excess merchandise and reopening locations. Over 90% of Nike-owned stores are open today, and inventory levels were down 1.8% from the prior year, the company said.
“Our strategy is working, and we are excited for what’s ahead,” CEO John Donahoe said.
The company now expects revenue to increase in the low teens this year, compared with an earlier forecast for percentage growth ranging from the high single digits to low double digits. But the recovery is uneven around the world. With China further ahead than other regions in coping with Covid-19, sales there soared 24% to $2.3 billion — the first time they’ve topped $2 billion. They were little changed in North America, meanwhile, as the resurgent coronavirus challenged retailers. Some of Nike’s stores are still operating on reduced hours, and local authorities have set limits on capacity.
Getting rid of excess inventory also has required Nike to dial up its promotions, and that’s weighed on its gross margin. The figure decreased 0.9 percentage points to 43.1%.
Nike’s tax rate jumped to
14% from 11% a year earlier, which the company blamed on changes to US law and a different earnings mix.