Nike Earnings & Stock Outlook
Nike shares are rising after the company reported that sales for the May quarter nearly doubled from the year-ago period, despite concerns over trouble for the brand in Greater China. The record fourth-quarter earnings and sales were fueled by record revenue in North America, its largest market.
The stock was up more than 13% in pre-market trading Friday following the earnings report and analysts predict the stock could surge another 50% for the foreseeable future. Nike itself offered a better-than-expected sales outlook for the upcoming year, driven by optimism around its women’s category, apparel business, and Jordan brand.
Nike on Thursday reported fiscal fourth-quarter earnings and sales that topped analysts estimates, fueled by record revenue in its largest market, North America.
The company continues to benefit from consumers seeking out comfortable clothing to wear for workouts as well as at home. Even as people return to schools, offices, and other social settings, many are still searching for relaxed options such as sneakers and stretchy pant.
- Nike reported earnings per share (EPS) of 93 cents, which was higher than analyst expectations of 51 cents. Revenue was $12.34 billion, higher than analyst expectation of $11.01 billion.
- Net income for the period ended May 31 rose to $1.5 billion, or 93 cents per share, compared with a loss of $790 million, or 51 cents per share, a year earlier. That topped analysts’ forecast of 51 cents per share, using Refinitiv data.
- Total revenue rose to $12.34 billion from $6.31 billion a year earlier, topping estimates for $11.01 billion. Sales were aided by the company selling more goods at full price and relying less on markdowns.
In North America, Nike’s biggest market, sales more than doubled to a record $5.38 billion as the company surged from a year earlier when the Covid pandemic was hitting the retail industry the hardest. The region’s sales were up 29% on a two-year basis.
In Greater China, sales were up just 17% at $1.93 billion. Though China is typically one of the fastest-growing markets for Nike, consumers in China have threatened a boycott after some Western brands including Nike expressed concern about allegations of forced labor in Xinjiang. China sales increased in all product categories in the quarter (led by a 34% increase in equipment sales). Jordan brand sales rose an impressive 31% to $5 billion in Nike’s just-completed fiscal year.
Digital sales were up 41% compared with the prior year and rose 147% compared with the same period in 2019. Digital sales are receiving a boost from Nike’s membership model, where 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.
Nike also saw a boost to its wholesale business — something that was largely inactive a year earlier during the Covid pandemic, when shopping malls and department stores had to temporarily shut their doors and put orders for merchandise on pause. Some of Nike’s key wholesale partners include Dick’s Sporting Goods, Foot Locker, and JD Sports.
Nike expects revenue to grow a low double-digit percentage, surpassing $50 billion, in the next year. Analysts were looking for annual revenue of $48.5 billion.
The company anticipates the first half of the year to grow faster than the second half. It anticipates supply chain delays and higher logistics costs will persist throughout much of fiscal 2022.
Supply chain issues have been plaguing much of the retail industry following the logistic constraints brought by the Covid-19 pandemic. A shortage of containers and a dearth of truck drivers, among other factors, have stalled merchandise from getting from ports to warehouses to shoppers’ homes.
Given Nike’s scale, analysts believe Nike’s outlook is shocking and achievable. Nike’s size and budget prove a key, long-term competitive advantage. The brand has no parallel in history when it comes to North America’s size/scope. With a leading ad budget fueling industry-leading dollar growth, continuous revenue and sales growth is expected.
How did Nike stock move?
Nike’s stock jumped 13% to $149.50 in pre-market trading on Friday. Investors rejoiced over Nike’s very upbeat full-year outlook. Nike shares are down more than 5% year to date. The company has a market cap of $211 billion.
Should I buy Nike shares?
The current consensus among 31 polled investment analysts is to buy stock in Nike Inc. This rating has held steady since June when it was unchanged from a buy rating.
The 27 analysts offering 12-month price forecasts for Nike Inc have a median target of 174.00, with a high estimate of 213.00 and a low estimate of 140.00. The median estimate represents a +13.80% increase from the last price of 152.90, according to CNN Business.