Shares of Nike (NKE -0.28%) were speeding past the competition today after the company crushed expectations in its first-quarter earnings report, released yesterday. Though the sportswear giant still faced headwinds from the coronavirus pandemic, the results showed its resilience and the power of its digital channel, where sales nearly doubled.
As of 11:23 a.m. EDT, the stock was up 9.4%.
Revenue in the quarter was down 1% on a reported basis, or flat on currency-neutral terms, coming in at $10.6 billion, which was much better than the analyst consensus of $9.14 billion.
Direct sales in the quarter, which include Nike's stores and web portals, rose 12% in the period to $3.7 billion, and digital sales soared by 82% with strong performance in all of its geographies, including triple-digit growth in the Europe, Middle East, and Africa (EMEA) region. Inventory came down 9% from the previous quarter but was still up 15% from a year ago, showing the company taking steps to manage inventory after the initial shock of the pandemic.
Nike's profits actually increased in the quarter, despite headwinds from the pandemic, as a lack of sporting events meant that marketing expenses -- or what it calls demand creation -- were down 33% to $677 million. As a result, net income rose 11% to $1.52 billion, and earnings per share was up 10% to $0.95, blowing away the consensus of just $0.47.
CEO John Donahoe said, "Our results this quarter continue to demonstrate Nike's full competitive advantage, as we strengthen our position in the midst of disruption. In this dynamic environment, no one can match our pace of launching innovative product and our brand's deep connection to consumers."
Nike's ability to deliver profit growth in the worst global crisis in memory is no doubt a sign of the underlying strength of its business model and the ability of its digital channel to deliver high-margin sales.
For the full fiscal year, the company said on the earnings call that it sees revenue growth of high single digits to low double digits and expects operating leverage to improve as it's forecasting flat growth of selling, general, and administrative expenses.
It's not surprising to see the consumer discretionary stock surging today after Nike's business quickly bounced back from a loss in the previous quarter, and shares reached an all-time high on the news. With profit growth already returning, Nike looks set to emerge from the pandemic stronger than ever.