Nike (NYSE:NKE) wants you to call it a comeback. Three months ago, the apparel giant posted encouraging fiscal first-quarter results that showed a near-complete rebound following the sharp declines investors endured during COVID-19 retailing shutdowns. That report included a quick return to growth in places like Europe and China, although revenue still ticked down in the core U.S. division while profitability declined.

It's likely that the U.S. slump ended over the next several months, allowing Nike to post rising global sales for the first time since its fiscal third-quarter report in late March. That's just one reason why investors will be watching the sportswear giant's upcoming quarterly announcement set for Dec. 18.

Let's take a closer look.

A young woman jogging over a bridge.

Image source: Getty Images.

It's a growing industry

The fiscal second quarter runs from September through November, a period that included the resumption of many live sporting events around the world. Nike's revenue trends likely enjoyed other tailwinds, such as rising traffic on its digital shopping platforms and steadily improving sales at reopened stores.

Overall, analysts are predicting that sales will rise 2% year over year this quarter compared to last quarter's 1% drop and the prior period's 38% slump.

NKE Operating Revenue (Quarterly YoY Growth) Chart

Data by YCharts.

Yet another hint that Nike is about to post a return to growth came in with its announcement in November that the company would increase its dividend payment 12%. CEO John Donahoe said at the time that the boost reflected management's confidence in the company's growth and profit potential. We'll find out on Friday whether the outlook for these metrics improved significantly over the last few months.

Margins will be rising

Most consumer discretionary companies are seeing big shifts toward their online platforms, and Nike is no exception. Digital volume jumped 82% last quarter to make up about 30% of the total business.

Rival lululelmon athletica generates over 60% of its revenue from e-commerce, and that gap between the two companies underscores the potential for Nike to post years of rising profit margins as more of its business shifts away from the wholesale segment toward direct-to-consumer sales.

Investors won't see much progress on that score in this report, because Nike had to work through some short-term inventory challenges related to COVID-19. But management's outlook for the second half of the fiscal year should include the prospect for steadily rising gross margin, which will amplify earnings growth.

Looking out to Q3

Donahoe told investors back in September that Nike was laying the groundwork for a return to robust sales growth in late fiscal 2021, in part by focusing on high-demand products and raising its pace of footwear launches. These moves already appeared to be lifting sales and helping the company charge full price for its merchandise last quarter.

The big question for investors this week is whether Nike stands by that timeline on Friday. But even if executives sound a cautious note due to COVID-19 and risks around global economic growth, the odds are good that Nike will post a return to sales growth this quarter with a march toward record-high gross profit margin likely just getting started.

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