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Why Nike Stock Gained 13% in May

By Royston Yang – Jun 3, 2020 at 6:01AM

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The pandemic has spurred a growing trend in solitary fitness routines.

What

Nike (NKE -1.55%) stock climbed 13% in May, according to data provided by S&P Global Market Intelligence.

With this rise, the sports apparel and footwear giant has almost reclaimed all the losses it sustained when the market crashed in March. At $98 per share, the stock has rebounded a whopping 57% from its low of $62.8 back then. Although the pandemic has led to many store closures, Nike continues to be one of the stronger consumer names in the industry.

A young woman, with a towel around her neck, smiling and holding a water bottle.

Image source: Getty Images.

So what

Nike provided an update in mid-May on COVID-19's impact on the company's operations. All of its stores in Greater China and 95% of those in South Korea have since reopened, though some are still operating with reduced hours. These stores have been closed since mid-March but have gradually reopened as restrictions have eased in these countries. Nike has also been engaging consumers through digital means, thus helping to dampen the impact of the reduction in physical store traffic. However, only 40% of Nike-owned stores in the Middle East and Europe, 15% in the Asia-Pacific region, and 5% in North America have reopened. The continued temporary closures are expected to negatively impact fourth-quarter earnings. 

Nike's product innovation track record continues to impress. Engineered to solve stress for the body and feet, the new Nike Air Zoom AlphaFly Next% is expected to be released on June 5. The company has been able to keep up its innovative culture even during a severe pandemic, which says a lot about why the company is sustaining high levels of interest in its products.

It's also doing good by partnering with nonprofit organization Good360 in the U.S. to donate more than 140,000 pieces of footwear, apparel, and equipment globally. 

Now what

Store reopenings are taking place across many countries as quarantine measures are relaxed and lockdowns are lifted. This trend has begun in over 15 countries including Germany, France, and the U.S. As the world gradually shifts toward normalcy, Nike's own and partner stores should see a return to normal operating conditions.

The pandemic has also led to a resurgence in outdoor running as well as encouraged more solo fitness routines. With fitness classes suspended due to stay-at-home mandates, more people have taken to exercising at home to keep fit. These trends will benefit Nike and other sporting companies over the long term.

Royston Yang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nike. The Motley Fool has a disclosure policy.

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