Nike (NKE -1.64%) is the undisputed market leader when it comes to athletic apparel, but is the stock a good investment right now? In this Fool Live clip, recorded on June 4, Fool.com consumer goods bureau chief Jena Greene discusses why Nike might be worth a closer look.
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Jena Greene: Nike has always played into its online presence, no matter how you feel about the company, it knows what it's doing online. That's true when it comes both the e-commerce, which has been a huge asset to Nike's overall bottom line especially over the past year, when we've all been shopping online at home from the comfort of our cellphones or treadmills. But it also is true when it comes to the news cycle. Sales declined overall during the last quarter due to supply chain constraints. But Nike's pushing the e-commerce is paid off.
The U.S. division just had its first billion-dollar quarter. But e-commerce, as I said before, is not the only way that Nike is engaging with consumers online. Remember that iconic believe in something campaign with Colin Kaepernick in 2018, the black and white social media campaign, Nike stock reached an all-time high after it hit social media. Nike stock did. In a more recent memory, Nike's March 2021 announcement that it no longer source products from Xinjiang, China, prompted a threat from Beijing to boycott the sneaker company out of existence. Its stock cratered 4% in the short term but I'm willing to believe that Nike took that risk into account, and then the stock has since recovered and management actually boosted its profitability forecast for 2021.
My overarching thesis with Nike is it knows what it's doing online, it's pushing into consumer e-commerce, it's working to alleviate the supply chain issues, and it is digging into social media forces as well. The CEO's name is John Donahoe, took over in January of 2020. He is relatively new to this business, but he knows what he's doing when it comes to e-commerce, he's on the Board of PayPal as well as ServiceNow which is Cloud computing company, its a software-as-a-service company, and he was formerly the president of eBay marketplaces, so there's no doubt that Nike knows where it wants to take its company in the next five, 10 years, and that's online, right to your doorstep, direct-to-consumer. To talk about the stock performance a little bit, year to date, it is down about 6%.
Third-quarter results were unimpressive to be expected, likely temporary. Overall sales growth was about three percent year over year, it did miss analysts expectations. Then they also saw a 10% drop in revenue. In North America, like I said before, supply chain constraints is the name of the game. From 2020 we saw that globally as coronavirus ravaged every single port around the world, but hopefully temporary. They're reporting fourth quarter earnings later this month, we expect to capture some of what the CEO called their delayed revenue from Q3 this quarter, and hopefully it will help to boost their bottom line.
Something that's noteworthy is digital sales from last quarter were up 59%. That's following an impressive performance in Q2, which was up 84%, and Q1 which was up 82%. Digital is up and to the right. The U.S., like I said before, e-commerce just had their first billion-dollar quarter. The goal ultimately is for e-commerce to account for 50% of the business, right now it's at about 35%. The question is, how does Nike execute this? How does it push people online and hopefully get more and more people on nike.com rather than buying their stuff through third-party sites.
One really interesting way that I've heard murmurs about I haven't used myself is called the SNKRS app, spelled S-N-K-R-S. They took all the vowels out because that's trendy these days, for their most loyal consumers and customers. They'll do things, if you download that app and create an account with them, they'll do things like drop sneakers early, give you insight information on what's coming out, may have exclusive promotions and sales, early releases, things like that. That has done exceedingly well, some far better than they've expected it to do. People are hungry for exclusives. The Nike brand is already so strong. If they can just pull that into their ecosystem, bring more and more people into it through an exclusive membership style basis, we've seen that that works quite well. Price-to-forward earnings is 44. It's not cheap, but that's just what, like you said before, that's when happens when it comes to blue chip stocks. You are paying for a premium here with Nike, I think it's going to do good things going forward, bullish sides ahead. It's resuming projects that were put on ice in 2020, including stock buybacks, inventory purchasing, and digging deeper into marketing and advertising spends. Like I said before, don't sleep on that one, that Kaepernick one in 2018 paid off handsomely for Nike, so I see only good things going forward.