When the coronavirus first hit, clothing retailers of all types took it on the chin as government responses dictated that retail stores virtually all shut down in a bid to keep people even more away from each other than they already were. Nike (NYSE:NKE) was no different, and had to find new ways to move product or risk shutting down altogether. It did indeed find those new ways, and now, as physical retail starts to get back on its feet under the weight of scads of “coronavirus restrictions”, Nike is making a real comeback that was started in the depths of the pandemic.
The Numbers are on Fire
Nike posted phenomenal numbers for the quarter, bringing in earnings per share (EPS) of $0.95, which was better than twice estimated figures of $0.47. Revenue also proved to be above forecasts, coming in at $10.59 billion, which was well beyond the $9.15 billion projected. Not quite as big a win as EPS was, but a win is a win, especially when it's more than an extra billion for Nike.
The quarter ending August 31 also saw gains on other fronts. Net income hit $1.52 billion, generating that $0.95 per share mentioned previously. A year ago at this time, the company managed to bring in $1.37 billion, or $0.86 per share, so even if there were no coronavirus at all, the company would still have reason to celebrate.
It wasn't all good news, however; that $10.59 billion in revenue is actually a bit of a decline from last year at this time, when the company posted $10.66 billion in revenue. Still, even under normal circumstances, that's a barely-noticeable blip that would be explained away handily, so don't look for Nike to be much hurt by that. Given that forecasts called for $9.15 billion in revenue, it's still a clear win for Nike.
Driving Forces Behind Nike's Big Win
A closer look at the numbers shows off just what produced numbers like these. First, Nike made the move to control its inventory, as we've seen done to great success with other retailers like Kohl's (NYSE:KSS), Macy's, (NYSE:M) and even Urban Outfitters (NASDAQ:URBN). Nike's inventory represented $6.7 billion this quarter, which was up 15% from the same time last year, but down 9% from last quarter. By controlling inventory, it can better control carrying costs and help prevent unnecessary cash burn.
Better yet, not only is Nike back open, but shoppers are coming in, and coming in with buying on their minds. While certainly Nike is making moves to limit the number of people in stores at any given time where it can, and other stores like Foot Locker (NYSE:FL) are doing similarly, those who are coming in are coming in planning to buy. With back-to-school sales likely contributing to the gains—there will almost certainly be some spillover into the newest quarter as well given the highly-distributed nature of “back to school” these days—it's clear that shoppers are at least starting to return.
The crown jewel for Nike, however, had to be its online sales. Not only are its online sales up 82%, reports note, but said sales are also about a third of Nike's business. Moreover, it's also increasingly making inroads into China. The combination of a whole new sales vector, a returning sales vector, and a completely new market opening up is giving Nike some major new advances. Just to top it all off, Nike expects the demand for its products to continue growing through the holiday season.
Right Place, Right Time
Take all of this together and it's a solid outlook for Nike. The stores are coming back, and with them, so too are shoppers. Online sales are exploding. Whole new places are stepping in to buy shoes, and when you not only sell more to established markets but sell in markets you haven't been previously seen in heavily, it's a recipe for growing sales, revenue, and profits, assuming you keep expenses down.
It certainly doesn't hurt Nike that the circumstances are favoring it; with work-from-home set to be a thing for the foreseeable future—even as some cash-strapped local governments start imploring companies to pull employees back into the office so the coffee shops, donut shops, and assorted other businesses that depend on that traffic don't go under—people will want comfortable clothes for everyday wear and home workout operations as well. That's going to make Nike highly sought-after material for about as long as work-from-home continues, and going into the holiday season, that's just another reason Nike is coming out ahead.
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