Nike’s misstepIt’s two steps forward and one step back for Nike, who outruns fourth-quarter estimates but gets tripped up on its forecast.
- Nike fell 7% on Tuesday to hit its lowest close since August 2020, even after the activewear brand beat on both ends with EPS of $0.90 on revenues that’d dropped by 0.8% to come in at $12.23bn.
- The company is in the midst of a strategy shift, having pulled its products from Foot Locker stores as it tries to focus more heavily on selling directly to consumers. Investors were worried that would affect the balance sheet, but direct sales grew 7% to $4.8bn so at least there are signs of progress there.
- The quarter wasn’t without its challenges tho. Nike, like everyone, is struggling with higher transport and lengthy shipping times and an inflation-driven drop in demand in North America – its biggest market. The stock’s drop was also prolly thanks to China, which saw sales take a hit amid covid and caused Nike to forecast flat current quarter revenue.
Ryan Plomp / Unsplash
Subscribe to Snaps
See the market snapshots that matter and nothing else – sent to your inbox daily. Designed to be read in 20 seconds or less.
Nike steps out of RussiaNike joins a growing list of multinational brands to make the permanent move out of Russia.
- The company's announced plans to permanently exit Russia after halting its online operations in the region and closing its stores in March amid the invasion of Ukraine. Russia has become economically isolated since then, and is currently working on legislation to punish foregin companies that leave its soil.
- Nike said the halting of operations there may impact the balance sheet in its last earnings report, using it as one of the reasons the brand didn’t issue FY guidance, but earnings next week will tell us the full extent of it. Given Nike gets less than 1% of revenue from Russia (that’s according to Reuters), it shouldn’t be too big of a deal.
- It’s only the latest Western brand to permanently leave the region, partly in support of Ukraine and partly because actually operating there is getting less and less possible. Cisco announced its plans to leave yesterday too, and McDonalds, Renault, and Starbucks have all made their exit as well.
Ryan Plomp/ Unsplash
Pledge allegiance to the sneaksNike’s Q3 sends the stock sprinting ahead after seeing North American sales reach a new personal best.
🔍 Key points:
- Nike raced ahead 6% in extended trading on Monday after outrunning estimates on both ends with EPS of $0.87 on revenues that saw growth of 5% to hit $10.87bn.
- Revenues were given a boost by robust demand in the US. Sales in the region were up 9% y-o-y thanks to increased physical store visits as lockdowns lifted, while its huge pivot to e-commerce during the pandemic continued to pay off in digital transactions.
- Nike’s Achilles’ heel right now is supply constraints. The sporting brand is holding off on giving an outlook for the current year as it waits to see the impact of crippled supply chains, the war in Ukraine, and historically high inflation. Lucky for Nike, investors looked on the bright side.
Barrett Ward / Unsplash
Nike’s NFT nightmareWe know imitation is the sincerest form of flattery, but Nike would rather take the cash than the admiration.
- Nike is suing online marketplace StockX for patent infringement – apparently, StockX has sold over 500 Nike-branded NFTs sneakers without authorization.
- It brings to light the question of NFT exploitation as the digital asset class permeates a long list of industries, with luxury fashion houses like Gucci and Louis Vuitton hopping on the trend.
- There’s already been several other lawsuits around licensed NFTs, for example Hermes is suing Mason Rothschild for selling a Birkin bag NFT without permission. And it’s not just fashion – Quentin Tarantino is getting sued for selling Pulp Fiction NFTs.
Josh Redd / Unsplash
Q2 earnings cautiously optimisticNike puts a spring into the step of its investors, with a reassuring Q2 report that topped Wall Street expectations.
- Both earnings and sales beat expectations. EPS hit $0.83 compared to an expected $0.63, while revenues for Q2 reached $11.36bn.
- The performance was driven by robust U.S. consumer demand, with North American sales bouncing 12% over the quarter. Nike says it expects Q3 sales to grow in the low single digits.
- The stock lost 2.7% on Monday, but is up by over 11% year-to-date.
Illustration by TradingView
Check out my VR kicksNike makes another move on the Metaverse with a leading digital apparel startup.
- Nike bought NFT start-up RTFKT Studios for an undisclosed amount, marking its firmest move yet into the Metaverse.
- It follows months of NFT and blockchain related patents, like its tokenized shoes and new Nikeland venture with Roblox. RTFKT got $3.1m for a collection of NFT sneakers in just seven minutes in February, so you know they get the shoe game.
- Other apparel brands are joining in on the hype. Adidas (ADS) announced a partnership with NFT project Bored Apes Yacht Club earlier this month.
Strut your digital stuffPrices open up 2% as investors applaud Nike’s debut on the Metaverse runway.
- Nikeland is here. Avatars dripping in virtual Nike swag can now interact in the new virtual world, which includes everything from parkour arenas to a giant digital showroom to show off your new goods.
- It’s launching in partnership with gaming platform Roblox, which has been getting a lot of attention recently for its VR capabilities.
- Its CEO was brought on specifically to transition Nike towards tech, so nobody is surprised that Nike’s been quietly getting ready to make its entrance by trademarking virtual apparel designs.
Hey, I love your (virtual) outfit...Nike joins the list of major companies throwing their metaphorical hats into the Metaverse ring with a new line of virtual sneakers and clothing.
👟 Nike wants to own the Metaverse look according to its latest trademarks and virtual design job postings.
🤓 Wanna trade sneakers? The new virtual products could also get involved in the booming NFT market.
🔦 VR is booming RN. Meta might have grabbed the headlines but others are already on board – Microsoft (MSFT) is launching a corporate metaverse on Teams.
Slam dunk for NikeNike bounds up to reach a record high on the back of its latest earnings, which boasted a $50 billion sales outlook.
Nike has come on in leaps and bounds since it first went public in 1980, and Friday saw its highest closing price ever at $154.35. Shares went flying 15% after the sportswear behemoth released impressive fourth quarter earnings, thanks to growing strength across most categories and many locations, along with guidance that smashed expectations.
The footwear apparel company has clearly rebounded from the pandemic, reporting earnings per share of $0.93 on revenue of $12.34 billion, compared to expectations of $0.51 in earnings per share on $11.01 billion in revenue. Net income came in at $1.5 billion compared to a loss of $790 million last year, and revenue was up a whopping 96% – largely driven by doubling sales in North America, its biggest market.
NIKE’s brand momentum is a testament to our authentic consumer connections, digital strength and continued operational execution. As we advance our consumer-led digital transformation, we are building a new financial model that will continue to fuel long-term sustainable, profitable growth for NIKE,
said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc.
E-commerce boomed during the pandemic, and Nike has made sure to capitalize on that as much as possible. The sportswear company said that its membership model has been a huge contributor to revenue, and online purchases from members hit a record high of $3 billion during Q4. Telsey Advisory Group even raised its price target from $160 to $180 thanks to the benefits of its membership option, and at least 12 other brokerages have also raised their price targets on the stock. Sales in China have also managed to recover following a political boycott of big brands like Nike and H&M earlier this year.
As impressive as all that is, a lot of the excitement was down to Nike’s guidance. In fiscal year 2022, the company is expecting revenue to go up by double digits and surpass $50 billion (analysts were looking for $48.5 billion) driven by its women's category, apparel business, and the Jordan’s brand.
Satan Shoes scareNike reacts to the massively controversial (and frankly, kinda cool) Lil Nas X “Satan Shoes” (which include a drop of human blood) that hit the market last week, suing the company that created them for affiliating the krazy kicks with its own brand.
Lil Nas X, who is best known for the infuriatingly catchy Old Town Road we couldn’t get out of our heads last summer, is facing criticism for his new controversial limited edition “Satan Shoes”, which are customized Nike Air Max 97 sneakers with red ink and "one drop of human blood" in the sole. The blood actually comes from the employees of Lil Nas X’s collab partner, MSCHF Product Studio, which is pretty gruesome. Talk about going above and beyond for your employer. They only made 666 pairs of the shoes, which went on sale for $1,018 (a reference to the bible’s Luke 10:18 – which basically reads "I watched Satan fall from heaven like lightning"), and they were MASSIVELY popular, selling out in less than a minute.
However, as the non-consenting face of the product (the giant tick on the side is a pretty big giveaway), Nike was seriously peeved, and is now suing New-York based MSCHF Product Studio Inc for infringing upon and diluting its trademark.
There is already evidence of significant confusion and dilution occurring in the marketplace, including calls to boycott Nike in response to the launch of MSCHF’s Satan Shoes based on the mistaken belief that Nike has authorized or approved this product,
the lawsuit said.
Nike asked the court to immediately stop MSCHF from fulfilling orders or making any more of the shoes, and also requested a jury trial so that they could seek damages. Rapper Lil Nas X wasn't named as a defendant in the lawsuit, but has responded with a few tweets that seem to reference the issue.
Nike’s port closure chaosNike reports its Q3 earnings, and though numbers beat estimates, sales growth takes a hit because of covid-induced port closures around the U.S. and Europe and prices sink just under 4%.
Nike reported revenue of $10.4 billion, up 3% compared to the year before, and net income of $1.45 billion, up from $847 million the same quarter the year before. Total sales rose to $10.36 billion, lower than the $11.02 billion forecast by analysts, but digital sales got a push of 59%, with impressive double-digit increases all over the world.
Revenue in North America, however, was down over 10% as the company faced shipment delays that went on for over three weeks, meaning that not even wholesale partners like sporting stores were receiving goods on time - which will inevitably lead to discounts on that merchandise and less time on the shelf and could impact future numbers.
Backlogged ports and a truck driver shortage in the U.S. have been a headache for a bunch of retailers, including Peloton (which had to spend $100 million on fixing the problem), Nordstrom, and Urban Outfitters. Nike’s outlook for the current quarter anticipates that transit times will start getting back to normal levels across the U.S. and Europe by April.
The company has also been investing in growth in its digital infrastructure - and boy, has it paid off. With the addition of its SNKRS app for the young consumer, as well as its new live streaming feature, online sales surged 59% in Q1, with the company booking $1 billion in the U.S. for the first time ever.
We’re seeing phenomenal engagement for this live interaction, with average viewing doubling,
said CEO John Donahoe. Nike seems to be proving that it has what it takes to keep growing, having gained over 70 million new loyalty program members during COVID, as well posting revenues of $38.2 billion for the four quarters before this, even in the face of global closures. Nike shares were up over 110% in the last year, taking the firm to a market cap of over $225 billion.