- General
- September 24, 2021
- 6 minutes read
Earnings: Nike’s Sales Falter, Shares Drop 6%
Sports apparel giant Nike has dropped its latest quarterly results, showing that its earnings still stand firm despite sales challenges…
Sports apparel giant Nike has dropped its latest quarterly results, showing that its earnings still stand firm despite sales challenges intensified by the Covid pandemic. But though its earnings beat analyst expectations, Nike’s stock fell by a significant percentage during trading on Friday due to its sales outlook.
- Nike posted $12.2bn in sales in the three months ended August 31, 2021, its fiscal 2022 first quarter. Sales were up 12% year-over-year and slightly unchanged from $12.3bn in the preceding quarter.
- Nike’s sales have dropped significantly due to the Covid pandemic that led to widespread closures of its physical retail centers. Even as the pandemic effects gradually wear off, the company is still battling supply chain disruptions caused by it.
- As usual, most of Nike’s quarterly sales came from the Nike brand ($11.6bn), while a minority was from the Converse brand ($630mn).
- For the quarter, Nike’s net profit was $1.9bn, up 23% year-over-year and 27% from the preceding quarter.
- The quarter’s earnings per share (EPS) was $1.16, beating average analyst expectations of $1.11 (according to Refinitiv survey).
Nike’s market cap dropped by 6% during trading on Friday. It’s not surprising because, though its earnings-per-share beat estimates, its sales growth prospects aren’t solid, especially as some effects of the pandemic continue to weigh on the company;
- For example, the pandemic disrupted Nike’s supply chain in Vietnam, one of its major manufacturing centers that produce about half of its sneakers. To prevent Covid spread, several factories producing for Nike there have been temporarily closed down and hampered the company’s supply chain.
- “We’ve already lost 10 weeks of production, and that gap will continue. … It’s going to take several months to ramp back to full production,” Nike’s Chief Financial Officer Matt Friend said in a conference call to analysts.
- Given the supply-chain disruptions, it’s not startling that market actions sent Nike’s shares down by 6% during trading.
To encourage shareholders, Nike has maintained returning money to them via share buybacks and dividends. The company paid $435mn in dividends and bought back shares worth $742mn in the just-concluded quarter.
