Athletic footwear manufacturer Nike Inc (NYSE: NKE) reported better-than-anticipated fiscal 2022 third-quarter revenue and earnings. However, the third-quarter revenue was lower than the comparable period of fiscal 2021. The company also reaffirmed its FY 2022 sales growth rate outlook.
Considering the uncertainties related to inflation, the Ukraine-Russia war, and unresolved global logistics issues, Nike refrained from issuing a detailed FY 2022 outlook. Following the quarterly earnings beat, the stock ended Tuesday’s trading session at $133.09, an increase of $2.90 or 2.23% from the prior close.
Beaverton, Oregon-based Nike reported 3Q22 revenues of $10.87 billion, up 4.90% from $10.36 billion in the similar period last year.
For the quarter ended February 28, 2022, the company posted a net income of $1.40 billion, or $0.87 per share, compared with a net income of $1.45 billion, or $0.90 a share, in the quarter ended February 28, 2021.
Analysts surveyed by Refinitiv had anticipated the sneaker retailer to post earnings of $0.71 per share on revenues of $10.59 billion. The quarterly earnings beat was aided by solid demand from North America.
Aided by an increase in sales without discounts, the company’s gross margins inched higher to 46.60% in the recent quarter, from 45.60% in 3Q 2021. The company’s wholesale revenue declined 1% in Q3 2022. However, brick-and-mortar (store) sales increased 14% y-o-y as foot traffic has normalized. Notably, online sales in Q3 surged 19% on a y-o-y basis, primarily due to a 33% increase in the North American region.
Nike continues to closely monitor China’s business. Nike’s revenues took a knock at the start of 2021due to a campaign against Western products by Chinese customers, and the company is still recuperating. Also, during the epidemic, the stocks were limited. At that time, Nike favored North America, its largest market, above China.
During the third quarter, Nike’s North America sales rose by 9% year-on-year. However, Greater China sales declined 5% on a y-o-y basis. Interestingly, Greater China is the third-biggest market for Nike after North America and EMEA (Europe, Middle-East, and Africa) segment.
For FY 2022, Nike reaffirmed its sales growth guidance of mid-single-digits over the past fiscal year. Refinitiv analysts are forecasting revenue growth of 5.30% for the fiscal year 2022.
The company’s CFO (Chief Financial Officer) Mathew Friend pointed out that Nike would have reported a better Q3 revenue growth during the holiday period in case it had adequate inventories to meet customer demand. Friend also revealed that all of its sub-contractors in Vietnam are currently functional. Earlier last year, some of the manufacturing facilities were forced to shut down to contain the spread of COVID-19.
Even though the factories in Vietnam are operational, the transportation period continues to remain higher than normal, specifically in North America.
Transportation times, however, remain elevated, particularly in North America. Nike has stepped up its purchase timetables, according to Friend, with the aim of having adequate items in stores this autumn.
At the end of February 2022, Nike had inventories worth $7.70 billion, an increase of 15% from last year, partly due to global logistics issues that have increased transportation times. The increase in inventories is partly negated by strong demand for Nike’s products.
The quarterly earnings beat is expected to keep the stock of Nike slightly bullish in the short term.
The historical price chart indicates that the stock of Nike is rising after testing the support at 133. The next resistance is anticipated only near 170. Additionally, the stochastics indicator is in the oversold region. Therefore, we are anticipating the stock to rally in the days ahead.
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