The Beaverton, Ore.-based activewear group revealed quarterly earnings Tuesday afternoon, recovering from earlier-year losses because of its strength in digital across China, North America and Europe.
Revenues for the three-month period ending Aug. 31 topped $10.5 billion, down from $10.6 billion a year earlier. But the athletic apparel and accessories firm still managed to pull in $1.5 billion in profits, up from $1.3 billion a year ago.
Shares of Nike, which closed up 3.2 percent to $116.98 on Tuesday, shot up more than 9 percent in after-hours trading as a result. Year-over-year the stock is up 33.5 percent.
“Our results this quarter continue to demonstrate Nike’s full competitive advantage, as we strengthen our position in the midst of disruption,” John Donahoe, president and chief executive officer, said in a statement. “In this dynamic environment, no one can match our pace of launching innovative product and our brand’s deep connection to consumers. These strengths, coupled with our digital acceleration, are unlocking Nike’s long-term market potential.”
Nearly all of Nike’s company-owned stores in North America, Europe and China were open during the quarter, with about 90 percent open in the Asia Pacific region and Latin America. The retailer also opened new stores in China, Seoul, Paris and Los Angeles during the quarter and is gearing up to open additional locations in New York City in the coming weeks.
Even so, Nike said in-store traffic continued to lag with so many consumers still apprehensive about entering physical stores amid the pandemic. The company has also recently closed stores along the West Coast of the U.S. in response to the devastating wild fires there.
Additional difficulties were in Nike’s wholesale business, which had lower revenues for the quarter.
The real growth driver was the group’s digital sales, which surged 82 percent.
“Nike continues to be one of the ‘best-in-class’ when it comes to building digitally led consumer experiences and its move toward reducing retailer partnerships confirms its confidence in continuing to be able to build sustainable competitive advantage in this experience-led environment,” said Sabrina McPherson, managing director and management consulting consumer products lead at Publicis Sapient, a digital consulting firm.
By region, sales in Nike’s North American footwear market rose 11 percent, with declines in apparel and equipment. The European, Middle East and African markets were strong in footwear and apparel, with declines in equipment, while the China market grew across all categories.
Revenues at the Converse brand also increased, up 2 percent to $563 million, driven by strength in the European market and in digital globally.
That’s a big jump for Nike, which lost $790 million earlier this year, thanks to the global coronavirus shutdown and a number of canceled sporting events.
But it didn’t hurt that activewear continued to trend amid the pandemic, as consumers found ways to exercise outside of the gym and entertain themselves with physical fitness as many bars, restaurants and museums remained shut. In addition, more consumers than ever were beginning to experiment with online shopping.
During the Sept. 17 annual shareholders meeting, Nike executives said the company was doubling down on its digital efforts. As of Tuesday, Nike’s digital business makes up about 30 percent of the overall company revenues. But Donahoe anticipated the e-commerce division could represent more than 50 percent of the business in the near future.
“The accelerated-consumer shift toward digital is here to stay,” Donahoe told analysts on the conference call Tuesday evening. “We know that digital is the new normal. Our customers have converted and will not go back.”
The company also said it would continue to invest in innovation, as well as apparel and the women’s division, where Nike has only about 10 percent of the market.
“We are seeing real consumer appetite for sustainability, especially among our youngest consumers,” Donahoe added on the call.
Nike ended the quarter with $9.5 billion in cash and equivalents and short-term investments and total liquidity of $13.4 billion. Selling and administrative expenses decreased 11 percent to $3 billion during the quarter while inventory rose 15 percent to $6.7 billion. Nike has $9.4 billion in long-term debt.
The company expects revenues to be up double digits in the second half, compared with the prior year.
“Nike is recovering faster based on accelerating brand momentum and digital growth, as well as our relentless focus on normalizing marketplace supply and demand,” Matt Friend, executive vice president and chief financial officer, said in a statement. “We continue to drive investment in capabilities that will fuel our consumer-led digital transformation, catalyzing long-term growth and profitability for Nike.”