Footwear and apparel retailer Nike (NYSE:NKE) crushed it in its first quarter of fiscal 2020. Its stock jumped on Tuesday as investors digested Nike's better-than-expected revenue and earnings per share. Revenue rose 7% year over year to $10.7 billion, easily beating analysts' average forecast for revenue of $10.4 billion. In constant currency, revenue was up 10% year over year. Meanwhile, Nike's earnings per share soared 28% to $0.86, smashing a consensus forecast for $0.70.
"NIKE's strong product innovation, combined with our industry-leading digital experiences, continue to deepen our consumer relationships around the world," said CEO Mark Parker in the fiscal first-quarter earnings call.
Looking beyond the earnings release, more insight into the company's strong performance can be gleaned from its earnings call yesterday.
Here are three key takeaways from the call.
1. 27% revenue growth in Greater China
Strong momentum in Greater China persisted during the quarter. On a constant currency basis, revenue in the region increased 27% year over year. This means the company has delivered double-digit year-over-year revenue growth in the market in every quarter for over five years.
The market "continues to set the pace for Nike's growth globally," said CFO Andi Campion. Growth in the market was "fueled by nearly all key categories, led by Sportswear and Jordan," he explained. "Coming off of the FIBA World Cup in China, we are also excited about the energy around Basketball in this geography, and globally, as we enter the new NBA season."
Digital sales in Greater China were particularly strong, rising at a rate greater than 70% year over year.
2. 42% growth in digital
Another key catalyst for Nike has been its revenue coming from digital sources. Nike's constant currency digital revenue rose 42% year over year in fiscal Q1, driven by improved digital services and greater international penetration of its Nike and SNKRS apps. The apps are now in more than 20 countries.
Parker shared details on how its membership program is helping digital:
Over the last three years, we've more than doubled the number of active users across all of our apps. With more active engagement, we create more value for both our members and for Nike. This quarter, for example, over 50% of our Nike Direct Digital growth came from members this quarter.
Overall, mobile is the biggest driver of digital -- and app experiences are fueling most of Nike's growth in mobile, Parker said.
3. Gross margin expanded 150 basis points
Helping Nike's outsize earnings growth compared to revenue growth during the quarter was a 150-basis-point expansion of its gross margin. The company's gross margin was 45.7% year over year during the quarter, up from 44.2% in the year-ago quarter. This happened despite headwinds in foreign currency exchange rates and higher product costs.
"Gross margin expanded by 150 basis points in Q1 as average gross selling prices expanded and higher margin NIKE direct growth outpaced wholesale growth," explained Campion.
For the full fiscal year, Nike now expects its total gross margin to expand by 50 to 75 basis points compared to fiscal 2019.