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5 Standout Numbers From Nike's Blockbuster Earnings Report

By Demitri Kalogeropoulos - Jun 25, 2021 at 10:53AM

Key Points

  • The growth rebound is about more than just surging demand.
  • Nike is boosting profit margins and generating excess cash.
  • Management sees a fundamentally stronger growth path ahead over the next three years.

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This sports apparel retailer's business entered full sprint mode in early 2021.

Nike (NKE 1.73%) is back to setting sales and earnings records. The footwear and sports apparel giant this week announced surprisingly strong revenue growth, rising profitability, and soaring cash balances as part of its fiscal fourth-quarter earnings report. The company also issued a bullish outlook for the new fiscal year, and over the longer term that runs through 2025.

Let's look at five standout metrics from that announcement.

1. Sales are up 96%

All of the ingredients were in place for a blockbuster sales figure in the quarter, which ended in late May. Sales were artificially depressed a year ago, and Nike said in the previous quarter that many orders had been pushed into the next quarter by shipping delays.

A jogger laces up shoes.

Image source: Getty Images.

Nike still outpaced Wall Street's high expectations. Sales jumped 96% to $12.3 billion while most investors were looking for an 80% increase to $11.1 billion. That result was a full 21% above the fourth-quarter level Nike hit in 2019.

2. Marketing spending hits $1 billion

Nike's marketing machine is back in full swing. Spending on advertisements, athletic sponsorships, and branding events (which Nike collectively calls "demand creation expense") jumped 21% to $1 billion thanks to the return of live sports.

That spending category is a competitive advantage because it keeps the Nike brand among the most valuable on the planet while setting a high bar for rivals to break through to consumers. The company spent $3.1 billion on these investments for the full 2021 year, down 13% due to the COVID-19 disruption.

3. Gross profit margin jumped 8.5 percentage points

One of the reasons Wall Street loves lululemon athletica's (LULU 1.49%) growth story is that it involves rising profitability thanks to a shift toward direct-to-consumer online sales. Nike is having its own success on this score, too.

Digital sales rose 40% year over year and were up 170% compared to two years ago. This success helped push Nike's gross profit margin up 8.5 percentage points to 46% of sales. "We are building a new financial model that will continue to fuel long-term sustainable, profitable growth," CFO Matt Friend said in a press release. Yet Lululemon still dominates in this arena, with profitability north of 57% of sales.

4. Cash holdings rose by $4.7 billion

Nike ended the year with $13.5 billion of cash on the books compared to $8.8 billion a year ago. That result gives management flexibility heading into fiscal 2022. Inventory dipped, too, in another positive sign for the business as it emerges from the pandemic.

CEO John Donahoe and his team are finding plenty of attractive areas to direct those resources, and shareholders can also expect rising cash returns. Nike has raised its dividend annually for 19 consecutive years and just resumed aggressive stock buyback spending.

5. Targeting 10% annual growth

Nike updated its long-term growth outlook with upgrades across the board. Sales are now expected to rise in the low double-digit percentages annually over the next three years, compared to the prior forecast calling for high single-digit gains. Financial goals were also boosted, with profitability, earnings, and return on invested capital all lifted compared to before.

Overall, investors have good reasons to cheer this news. Nike is back to setting growth records, and its outlook implies a fundamentally stronger business than shareholders had seen even as recently as 2019.

Demitri Kalogeropoulos owns shares of Nike. The Motley Fool owns shares of and recommends Lululemon Athletica and Nike. The Motley Fool has a disclosure policy.

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Stocks Mentioned

NIKE, Inc. Stock Quote
NIKE, Inc.
$116.07 (1.73%) $1.97
Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
$321.69 (1.49%) $4.71

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