Nike Inc. (NKE, Financial) released its results for the second quarter of fiscal 2021 on Dec. 18 after the market closed. The company's earnings and revenue topped expectations due to growth in the digital business. Additionally, lower marketing expenses during sporting events boosted overall results.
Key metrics
The company, which is known for its athletic shoes and apparel, posted earnings per share of 78 cents in the second quarter, up from 70 cents reported in the prior-year quarter. Revenue of $11.24 billion jumped 9% on a year-over-year basis. Analysts had predicted earnings of 62 cents on $10.56 billion in revenue.
During the quarter, Nike's gross margin dropped to 43.1%. Various factors were responsible for lower gross margin, including Covid-19 and higher supply chain costs, which was only partly offset by higher average selling prices.
At the end of the quarter, the company had cash and cash equivalents and short-term investments totalling $11.8 billion.
Robust online sales
Online sales were up 84% in the reported quarter as the coronavirus pandemic and the resulting store closures rapidly increased the pace of digital adoption. More customers shopped from the company's website and bought sneakers and workout apparel. The company attempting to bolster its online sales so that it contributes 50% of the top line. Although the majority of the stores are back open, customer traffic hasn't returned to the pre-Covid or year-ago levels. The company's direct-to-consumer business also surged 32%. Executive Vice President and Chief Financial Officer Matt Friend commented the following:
"With healthy inventory positions across all geographies, our return to growth is a testament to our digital strength, as well as our disciplined marketplace and financial management. As we look ahead, we are focused on moving even faster against our strategic vision of Consumer Direct Acceleration and fueling sustainable, long-term growth and profitability."
To further strengthen its online performance, the footwear and apparel giant said it has been opening smaller-format stores on a global basis where the customers could pick up their online orders. In addition, the company has been investing in its website, mobile apps as well as owned outlets, given that consumers are avoiding visiting department stores and shopping malls due to the Covid-19 pandemic.
By geography
Sales were up 1% to $4 billion in North America, while sales in China were up 24% to $2.3 billion. Sales in the Europe, Middle East and Africa region rose 17% during the quarter to $2.96 billion, while the Asia Pacific and Latin America (APLA) region's sales remained unchanged from the year-ago period ($1.47 billion).
At this time, 90% of the Nike-owned stores are back open. Few stores, however, are running on reduced hours.
Guidance
For fiscal year 2021, Nike is projecting revenue to grow at a low-teens percentage on a year-over-year basis. Analysts, however, are anticipating revenue growth of 12.3%.
Disclosure: I do not hold any positions in the stocks mentioned.
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