What happened
Shares of Nike (NKE 0.66%) were moving higher after the sportswear giant turned in another strong earnings report Friday evening. Nike again topped estimates on the top and bottom lines, showed off strong growth in the digital channel, and raised its guidance for the fiscal year.
As of 12:44 p.m. EST, the stock was up 4.9%.
Image source: Nike.
So what
The Swoosh owner said second-quarter revenue was up 9% to $11.24 billion, topping estimates at $10.56 billion, driven by a 32% jump in direct sales, which include both Nike-owned stores and its online sales. Digital sales, derived from its website and apps like SNKRS, jumped 84% on triple-digit growth in North America, as Nike's e-commerce strength helped it absorb headwinds in brick-and-mortar retail from the pandemic. Geographically, sales in Europe, the Middle East, Africa, and China drove the quarterly growth.
Gross margin fell from 44% in the quarter a year ago to 43.1% due to increased markdown to reduce excess inventory related to the COVID-19 impact. However, selling, and general and administrative costs fell 2%. The company saved money as demand-creation expense declined 17% -- again due to COVID-19 -- as it pulled back on advertising spending related to sports events.
As a result, pre-tax income jumped 17% and earnings per share ticked up 11% to $0.78, ahead of analyst expectations at $0.62.
CEO John Donahoe said, "NIKE's strong results during a dynamic environment show the power of staying on the offense. Fueled by compelling innovative product and global brand momentum, we continue to extend our leadership. Our strategy is working, and we are excited for what's ahead."
Now what
Looking ahead, Nike hiked its full-year revenue-growth guidance to the low teens from a previous range of between high-single digits and low-double digits. Considering revenue growth for the first half has only been 4%, the company is targeting at least 20% growth over the next two quarters as it laps the most challenging period of the pandemic. Management also sees gross margin expanding by 50 basis points year over year, compared to previous guidance of flat growth.
The results are the latest evidence that Nike is executing impeccably during the pandemic, and that its investments in technology and the direct channel are paying off. At a time when much of the apparel industry is getting crushed, Nike stands head-and-shoulders above the competition. It's not a surprise the stock reached an all-time high today.
