Nike Inc. soared in late trading after online-order growth helped sales vault past Wall Street estimates, laying out a blueprint for how the sportswear giant could cope with the coronavirus pandemic worldwide.
The company posted revenue of $10.1 billion for the three months ended Feb. 29, a period that included shutdowns across China, one of its key markets. Analyst had projected of $9.6 billion. Earnings amounted to 53 cents a share, matching estimates.
Since the end of the quarter, hundreds of millions in Europe and the U.S. are now living under various forms of lockdowns, and Nike may have an opportunity to accelerate its conversion of customers from brick-and-mortar shopping to digital. E-commerce sales, already a major priority for Nike, were up 35% last year to $3.8 billion. In the latest quarter, they rose even faster, at 36%.
“Amidst unprecedented conditions across the globe, we are staying focused on not simply managing through this situation, but taking the actions that will allow us to emerge from it even stronger than before,” Chief Executive Officer John Donahoe said on an earnings call. “We know it won’t be easy, but Nike is better prepared than anyone else to regain that momentum, extend our brand leadership and reshape the future marketplace.”
Nike’s shares rose as much as 10% to $79.85 in after hours, adding to gains in regular trading Tuesday fueled by a broader market rally. As of Monday, the stock had been down 38% this year, a steeper decline than the S&P 500 Index’s 31% drop.
Nike’s latest results don’t give a full picture of the pandemic’s impact, since its fiscal third quarter only ran through February. But it’s one of the first big U.S. companies to deliver earnings after the Covid-19 virus hobbled economies around the world, shuttering factories and offices.
Like a number of other companies recently, Nike opted not to provide guidance for its current quarter due to uncertainty around the virus. The company had previously said it expected full-year percent growth in the low double digits, but those projections came before the virus reached Europe and North America, where Nike has closed a majority of its stores.
The company’s coronavirus playbook anticipates that each geographical region will go through four phases, Donahoe said. In the first stage, which Nike calls containment, a country partially shuts down and stores close to stem the spread of the virus, leaving brands like Nike to rely heavily on digital sales.
Second is recovery, when brick-and-mortar stores slowly begin to reopen. That’s followed by a return to normalcy, when store traffic and in-person shopping hits pre-virus levels. And the last phase is a return to full growth for Nike.
In China, for example, containment lasted five to six weeks, and at one point 75% of stores selling Nike products were closed. The country is now through recovery and beginning its return to normalcy, Donahoe said. He expects the company’s China sales to be flat next quarter, then return to growth in early next year.
“In the U.S., we’re earlier in the cycle,” he said.
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