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Nike reported a surprise loss for the quarter May 31 2020 after the close Thursday. $NKE saw strong digital revenue growth but gross margin pressure and selling and administrative expense gains with inventory buildup hurt results.

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Nike Inc NYSE: NKE Reported Earnings After Close Thursday

 ($0.51) Missed $0.07 EPS AND $6.31 Billion Beat $7.32 Billion forecast in revenue. 

Earnings 

Nike reported a loss of $790 million, or 51 cents per share, during the period ended May 31, compared with net income of $989 million, or earnings of 62 cents a share, a year ago. Total revenue was down 38% to $6.31 billion from $10.18 billion a year ago. Analysts were calling for earnings of 7 cents per share on revenue of $7.32 billion, according to Refinitiv data.

 

Nike Inc NYSE: NKE

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After Closing $101.40 +1.32 (+1.32%) on Day

Highlights

  • Sales in North America were down 46%
  • Sales in China were down just 3%, with many of Nike’s stores in that region reopening sooner during the pandemic than in the U.S.
  • Sales at the Converse brand dropped 38%.
  • For the Nike brand, footwear sales fell 35%, apparel was down 42% and equipment revenue tumbled 53%, as sports and many recreational activities have largely been put on hold due to the Covid-19 crisis.
  • Digital sales soared 75%, representing about 30% of total revenue, as shoppers flocked to Nike’s website for sneakers and workout gear.
  • The company had previously set a goal to reach 30% digital penetration by 2023. But that timeline was accelerated rapidly because of the pandemic.
  • Nike now targeting its e-commerce sales accounting for 50% of overall sales “in the foreseeable future.”
  • Expenses for shipping and returns also put more pressure on the company’s profits.
  • Nike’s margins during its fiscal fourth quarter shrank to 37.3% from 45.5% a year ago.
  • Inventories as of May 31 amounted to $7.4 billion, up 31% from a year ago. The company said the increase was due, in part, to it shipping less merchandise to its wholesale partners because of the pandemic.
  • Nike said product shipments to wholesale customers were down nearly 50% during the quarter.
  • As of Thursday, Nike said roughly 90% of its owned stores are back open globally.
  • In China, almost all of its owned stores are reopened. About 85% are open again in North America.
  • According to CEO Donahoe, Nike’s digital business is up triple digits, so far, in June.
  • Bricks-and-mortar retail traffic remains below prior-year levels, he said.

Nike Q4 2020 Earnings

Outlook

Nike is not offering a complete fiscal 2021 outlook at this time. But Donahoe said revenue should be flat-to-up compared with the prior year.

Source: Nike, AlphaStreet

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