On September 22, local time in the United States, the world-famous sports brand Nike released its first fiscal quarter financial report for fiscal year 2021 (June 2020-May 2021).
For the first fiscal quarter ended August 31, Nike’s total revenue reached US$10.59 billion. , although there was still a 0.6% year-on-year decline due to the impact of the epidemic, it was better than market expectations of US$9.15 billion, with earnings per share reaching 95 cents, more than double market expectations.
This eye-catching financial report surprised many analysts. You know, in the fourth quarter of fiscal year 2020, Nike’s global revenue reached US$6.313 billion, a year-on-year decrease of 38%, and a loss of US$790 million. In comparison, Nike achieved a net profit of US$990 million in the fourth quarter of fiscal 2019.
What helped Nike achieve its reversal was, on the one hand, the strong growth in online sales. Nike’s online sales in the first quarter of fiscal year 2020 increased by 82% year-on-year, accounting for 30% of total revenue. Another reason is due to performance growth in key markets such as China.
Data from Nike show that in the first fiscal quarter of the company’s latest fiscal year 2020, Nike’s sales in the Chinese market increased by 6% year-on-year. At the same time, sales in Nike’s most important North American market experienced a 2% year-on-year decline.
Brian Nagel, senior equity research analyst at Oppenheimer Co., said that China is Nike’s fastest-growing market and is the first to recover from the COVID-19 epidemic. region, China will largely serve as a reference for markets in the United States and other regions.
Many retailers that have recently released data have experienced a rebound in performance in the Chinese market. The analysis pointed out that the recovery of China’s economy and the recovery of the retail industry are expected to continue to provide support for the performance of international brands.
Data from Nike show that in the first fiscal quarter of the company’s latest fiscal year 2020, Nike’s sales in the Chinese market The amount increased by 6% year-on-year. At the same time, sales in Nike’s most important North American market experienced a 2% year-on-year decline.
Currently, the epidemic is showing signs of rebound in some parts of Europe, which has made the global retail industry face new uncertainties. However, the epidemic is also a double-edged sword for retailers. Taking Nike as an example, the epidemic has obviously accelerated its online transformation.
Matt Friend, Nike executive vice president and chief financial officer, said in an earnings call: “The acceleration of digital technology is not just a short-term challenge for physical retail. It is also a signal of strategic shift to new markets in the future. The company will focus on online development in the next stage.”
Nike CEO John Donahoe said that online sales may be a permanent trend. “We know that digital (sales) will be the new normal. Consumers are now digitally ‘locked’ and will not change back.”
Because they are optimistic about Nike’s next layout, investment banks’ ratings of Nike have not changed. JP Morgan maintains Nike’s overweight rating, with the latest target price of $104; Morgan Stanley maintains Nike’s overweight rating, with the latest target price of $119; Credit Suisse maintains Nike’s outperform rating, with the latest target price of $111 .
The reason why investment banks still maintain a buy rating on Nike is mainly because Nike’s growth logic has not changed, and this will continue to bring incremental performance to it.
Jeffrey analysts said that the changes Nike has made in all aspects of its business will make it a more digital enterprise, and the company is expected to have EBIT in the next five years. Profits will be greatly improved.
Three years ago, Nike began to adopt a “direct-to-consumer” strategy. In recent years, Nike has been promoting consumer-led digital transformation, and the epidemic has accelerated this process. As “direct-to-consumer” becomes a trend, Nike has decoupled from many wholesalers and increased its direct sales business. This move gives Nike more initiative.
The financial report shows that in the first quarter of this year, Nike Direct business (NIKE Direct) achieved growth in all regions around the world, with revenue reaching US$3.7 billion. A year-on-year increase of 13% on an unchanged basis.
Nike said it will continue to invest in innovation as well as apparel and women’s sports merchandise. Currently, Nike holds approximately 10% of the global women’s sports merchandise market.
Nike expects revenue to achieve double-digit growth in the second half of this year year-on-year.
But in addition to the performance that exceeds expectations, Nike also has some problems to face. The most prominent is that Nike has a lot of inventory to deal with – its inventory levels have increased by 15% compared with last year due to temporary store closures and reduced supply to wholesalers. </p
