Saturday, December 9, 2023

Nike stock hits record high as e-commerce crosses pandemic

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Count Nike among the biggest winners of the pandemic.

Shares of the sportswear brand hit a new all-time high early Monday in their first trading session since Nike reported another round of stellar quarterly results. These results, released after the US markets closed on Friday, has shown that Nike is navigating the pandemic exceptionally well thanks in large part to its digital prowess.

Nike shares rose 7.7% on Monday morning to $ 147.95, giving it a market cap of $ 228 billion. The shares have more than doubled in value since the pandemic was declared in March.

The secret? Nike has used digital firepower, from its e-commerce site to its fitness apps, to keep customers focused on its brand and to capitalize on the global shift in spending toward sports and casual wear during the pandemic. . Nike’s already strong e-commerce business grew more than 80% year-over-year for the third consecutive quarter.

Even as stores, 90% of which are currently reopening, continued to see fewer visits from shoppers, e-commerce has exploded in the United States and abroad. In China, for Singles’ Day, a November event several times larger than Cyber ​​Monday in North America, Nike was the top sportswear brand, garnering the most hits in this category on Tmall, a huge online store. In the United States, Nike said it had record online sales on Black Friday.

Nike CEO John Donahoe said the results show the company is taking market share from its competitors. “These are times when strong brands get stronger,” Donahoe told analysts on a conference call Friday afternoon after the announcement of the results.

Long before the start of the COVID-19 epidemic last year, Nike had made big investments in e-commerce: By selling many more of its products directly to customers, the company aimed to compensate for a recent decision to reduce its exposure to a number of wholesalers. , like department stores.

But Nike also spent a lot of time and money on its applications for shopping and offering training. In the previous quarter, whose results were released in September, e-commerce exceeded the 30% threshold as a percentage of Nike sales, a level it previously expected to reach only in 2023.

“The shift of consumers to digital is permanent and our digital penetration will only increase in the years to come,” Donahoe said on Friday.

The result has been less reliance on physical retail at a time when many shoppers are still shying away from stores. Overall Nike revenue for the quarter rose 7% year over year at constant exchange rates to $ 11.2 billion. This largely beat Wall Street projections for $ 10.55 billion. Meanwhile, net profit rose 12% to $ 1.25 billion, reflecting Nike’s skillful inventory management, which reduced the need to sell anything at liquidation prices, as well as its reduction. costs.

Wall Street expects Nike to further develop the winning formula of increasingly taking matters into their own hands through direct sales, both with its own stores and ecommerce. “There are many benefits (financial and otherwise) to selling directly, and the channel mix will likely continue to move in that direction for many years to come,” Pivotal Research Group wrote in a research note.

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