Nike
Inside the Numbers
For the quarter, Nike reported $0.90 per share in earnings which topped analysts' expectations of $0.76 per share. Revenue missed at $10.4 billion compared to expectations of $11 billion.
North American sales declined by 10% compared to last year due to shipping delays which affected sales at retail outlets. This could have knock-on effects as there will be additional discounts to move this merchandise to make room for new shipments of summer and fall styles.
This issue has been affecting all types of consumer goods companies due to the combination of high demand, inventory restocking, and supply chain disruptions. Given that demand is expected to increase in the second half of the year, this issue could linger till the end of the year.
Sales in Europe were also affected by shutdowns in many countries, although digital sales did grow 60% in the region. Sales in Asia were a bright spot with a 45% increase from last year. Notably, this region seems to be doing the best in terms of combatting the virus.
Nike issued 2021 revenue guidance which slightly exceeded consensus. It sees 13 to 16% revenue growth and expects that the inventory issue will improve over time. It also anticipates that lockdowns will ease with higher levels of retail sales.
Nike's digital sales channel continues to be the most compelling part of its story. Its direct-to-consumer sales increased by 20% to $4 billion. Digital sales offer greater margins, opportunities to upsell and increase connection with customers. Although retail sales remain the large bulk of revenues, it's likely that future growth will come from digital sales channels.
Stock Price Outlook
Nike's share price has essentially been flat over the past six months. Yet, the company has been successfully able to execute over this time period and maintain its momentum. The pandemic has dented sales, however, it accelerated the growth of its online sales channels.
Therefore, Nike continues to be attractive. Its valuation is also becoming attractive with a forward PE of 35 especially as margins should continue to increase as DTC and online sales become a larger share of revenues.