Nike Gains as U.S. Growth Cushions China Setback

This post was originally published on this site – Nike stock (NYSE:NKE) traded 3.7% higher in Tuesday’s premarket as reopening in U.S. got people to buy more of its shoes and apparel in the three months through November.

Sales in North America, Nike’s largest market, rose 12% year-on-year, offsetting a 20% slump in the company’s sales in China. A jump in direct sales also helped the company overcome reverses in the world’s second-largest economy, growing 9% to $4.7 billion.  

Sales in China suffered as its suppliers’ factories in Vietnam, a key manufacturing base, were shut for long periods due to the pandemic.  

The company told analysts in a conference call that Vietnam factory closures led it to cancel production of roughly 130 million units. All factories are now operational and weekly footwear and apparel production has reached roughly 80% of pre-closure volumes, Nike said.

Robust demand, strength in online sales and supply chain issues all reduced the need for discounting, something that helped Nike grow its margins. Gross margin rose 2.8 percentage points to near 46%.

Second-quarter revenue rose 1% to $11.4 billion. Adjusted profit per share rose 6% to 83 cents and comfortably beat estimates.

Nike repeated its forecast of around 5% sales growth in the year through May, despite ongoing supply chain disruptions due to Vietnam factory closures that will affect current-quarter sales. Sales in the fiscal third quarter are expected to grow by less than 5%, while the improvement in margins is also set to weaken to 1.5 percentage points in year-on-year terms.