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 Nov. 30, the athleticwear company reported Friday. 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,” Chief Executive Officer John Donahoe said in a statement.
Nike shares rose as much as 6% to $145.49 in extended trading on Friday. The stock has gained 36% this year through the close.
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 U.S. law and a different earnings mix.
The company plans to increase its pace of opening new locations, with 30 additional stores coming in the second half of its fiscal year, Donahoe said on a conference call. It also continues to expand its product lines: A women’s Jordan product and additional kids sizes are planned, for example. And the company is heavily focused on its membership program, whose ranks have grown by 70 million since the start of the pandemic.
Nike’s leaner inventory should help improve margins in the holiday period, said Poonam Goyal, an analyst at Bloomberg Intelligence.
Like many retailers, Nike invested heavily in its e-commerce operations as stuck-at-home consumers shifted their shopping online this year. Its direct sales climbed 32% last quarter, helping make up for the brick-and-mortar slump.
The company has been pursuing a strategy called Consumer Direct Acceleration that is meant to supercharge e-commerce, but also has resulted in extra expenses and job cuts.
The Nike brand did especially well online last quarter, with digital sales rising 84%.
“Our brand power this year has been second to none,” Donahoe said.
(Updates with comments from conference call starting in seventh paragraph.)