Funny Quotes About Michigan Back at It Again With the Black Nikes
Nike (NKE iv.74%) is growing again. Simply two quarters after reporting its worst sales slump on record, the visitor announced rising sales across each of its geographies, including in the primal U.Southward. market place. Inventory levels dropped and costs cruel, besides, which gives direction plenty of flexibility heading into the 2nd half of fiscal 2021.
CEO John Donahoe and his team said in a conference call with analysts terminal week that the pandemic has them feeling cautious about this brusk-term menses. But they're as bullish as ever about Nike's opportunities to accelerate sales growth and hit a new level of profitability over the next few years.
Permit's look at a few highlights from that call and dig down a flake on what they might mean for investors.
Prototype source: Getty Images.
one. How Nike recovered
Our return to growth this quarter was fueled by a relentless innovation pipeline.
-- CEO Donahoe
Nike credits its innovation for helping it notch a ane% growth uptick in the U.Due south. just two quarters subsequently posting a 46% slump during COVID-19 retailing shutdowns. That innovation applies to product launches like new basketball and running-shoe brands, likewise as improvements in the digital ecosystem.
Executives highlighted the growing power of their cadre footwear app, which was instrumental in keeping customers engaged in the brand and pushing digital sales to new highs.
Nike'due south e-commerce level recently passed the thirty% rate that management had initially targeted for belatedly 2023, and there's every reason to expect further gains ahead. "The consumer shift to digital is permanent," Donahoe said, "and our digital penetration will but increase in years to come."
2. A slimmer business organization that's still investing in growth
We fix clear measures of success for the first half of this fiscal year, and now, six months after, we've exceeded those goals.
-- CFO Matthew Friend
Nike posted a lower gross profit margin this quarter, simply every bit direction had warned it might, back in late September. But the company had to cut prices less aggressively than management had initially expected. As a result, Nike entered the holiday flavour in a strong inventory position that might support a profitability rebound starting as early every bit next quarter.
NKE SG&A Expense (TTM) data by YCharts.
The company is gaining efficiency, too, with selling expenses dropping and marketing returns improving in the digital-advertising channel. These wins accept allowed Nike to heave spending in high-return areas similar product evolution and the eastward-commerce segment. "Our financial results ... are proof that Nike has recovered and is moving forward," Friend explained.
3. Cautious in the short term, only with assuming bets on 2022
While we expect connected volatility in the short-term due to the pandemic, a faster first-half recovery has mitigated the largest operational risks.
-- CFO Friend
Nike raised its sales, earnings, and profitability outlooks for fiscal 2021 while noting some major risks ahead effectually economic growth rates and COVID-19 retailing restrictions. Management is yet cautious nearly that brusque-term period, and the restraint is reflected in its decision to limit inventory purchases and continue the agree on stock repurchases. Holiday shopping traffic at stores will likely be far lower than in a normal year, after all, and spending trends could easily exist disrupted again.
The bigger-picture show outlook is equally bright as ever, though, and investors don't have to rely only on direction'south words to see that fact. Metrics like the contempo 19% sales-growth spike in China -- or the 84% increase in digital sales -- demonstrate that the brand is primed for many years of stiff earnings and greenbacks flow ahead, even if the side by side six months are volatile. That's why it shouldn't thing much to shareholders if Nike takes a small footstep backward before racing ahead in fiscal 2022.
Source: https://www.fool.com/investing/2020/12/24/nikes-second-quarter-earnings-in-3-quotes/
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