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U.S. market and wholesale drive strong Q4 for Nike

By Angela Gonzalez-Rodriguez

28 Jun 2021

Business |ANALYSIS

Image: Nike, U.S. Official Web

Nike has topped analysts’ estimates for their fourth-quarter with record revenue driven by record revenue in its U.S. market and their wholesale business. Earnings per share (EPS) also surpassed the market’s forecast (93 cents vs. 51 cents expected.)

Nike posted Q4 revenue of 12.3 billion dollars, up 96 percent from last year, and noting adjusted earnings per share of 93 cents. By channel, Nike Direct sales increased 73 percent to 4.5 billion dollars in the quarter. Notably, North American revenues came in at record heights, improving by 141 percent on a reported basis, leading to the stock hitting an all-time high during trading hours (Nike’s shares gained 12 percent the day it reported its financial results.)

“Nike’s brand momentum is a testament to our authentic consumer connections, digital strength and continued operational execution,” said Matt Friend, EVP and CFO, in a corporate statement. “As we advance our consumer-led digital transformation, we are building a new financial model that will continue to fuel long-term sustainable, profitable growth for Nike.”

Strong connections with customers and more investment in digital will shape Nike’s FY22

Similarly, the company’s president and CEO John Donahoe added via earnings release that Nike’s strong results this quarter and full fiscal year demonstrate Nike’s unique competitive advantage and deep connection with consumers all over the world.

Looking ahead, the athletic apparel group will continue to “to invest in innovation and our digital leadership to set the foundation for Nike’s long-term growth.” Noteworthy, that momentum is extending into the coming months, encouraging Nike to offer a better-than-expected sales outlook for their new fiscal year, driven by optimism around its women’s category, apparel business and Jordan brand.

“When we can talk about a company the size of Nike scale, still blowing away numbers from a revenue perspective, but also from a margin perspective, they really gave you a lot to choose from,” highlighted BMO Managing Director and Senior Analyst Simeon Siegel in a recent Yahoo Finance Live session. Siegal also noted how “the Jordan brand in and of itself is one of the largest brands in the history of time. I mean, that’s a fascinating thing to think about — the smaller part of Nike still far outpaces everyone else … The reality is this company showed remarkable outperformance across the board,” he said.

Wholesale business revives after the pandemic’s slowdown

Nike also saw a boost to its wholesale business: Its brand shipments for the year increased 16.7 percent to 35.77 billion dollars.

It’s worth recalling how this channel was almost inactive in the comparable period a year ago, when the coronavirus pandemic was reaching the peak of its first wave worldwide. Lockdowns and other restrictions put orders for merchandise on pause. The company now anticipates supply chain delays and higher logistics costs will persist throughout much of fiscal 2022. While restrictions are easing worldwide as vaccination rates improve, a shortage of containers and a lack of truck drivers are some of the obstacles affecting retailers, as they see their merchandise stall at ports and warehouses.

In the period ended on May, 31, sales were aided by the company selling more goods at full price and relying less on markdowns, as per analysts covering the stock. North America, Nike’s biggest market, saw sales more than double over the fourth quarter, reaching a record 5.38 billion dollars as the company surged from a year earlier. U.S. sales have been trending upwards, noting a 29 percent increase on a two-year basis.

Also up were digital sales, which improved by 41 percent compared with the prior year and rose 147 percent compared with the same period in 2019. In this regard, Nike highlighted that its membership model is helping to fuel its e-commerce business. Online purchases from Nike members, who receive first access to exclusive products and other perks, hit a record $3 billion during the fourth quarter. Nike said it now has more than 300 million members globally. “Fueled by our momentum, we continue to invest in innovation and our digital leadership to set the foundation for Nike’s long-term growth,” said Nike CEO. “It’s important to note as we normalize our post-pandemic business and continue to reshape the marketplace, we do not expect quarter-by-quarter growth to be linear,” he said.

Image: Nike, official website, U.S.