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Markets Soar as Darden, Nike Show Consumer Strength

By Dan Caplinger – Sep 23, 2021 at 5:48PM

Key Points

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Find out what these consumer giants said in their latest financial reports.

The stock market continued to move sharply higher on Thursday, bouncing back from its big plunge to start the week. Investors have renewed confidence that the broader economy will cooperate with their hopes for sustained growth without painful side effects. That enthusiasm helped send the Dow Jones Industrial Average (^DJI -0.56%), S&P 500 (^GSPC -0.09%), and Nasdaq Composite (^IXIC) to another day of gains exceeding 1%.

Index

Percentage Change

Point Change

Dow

+1.48%

+507

S&P 500

+1.21%

+53

Nasdaq

+1.04%

+155

Data source: Yahoo! Finance.

The health of the global consumer economy is an essential ingredient of the stock market's broader success, and on Thursday, investors got two readings on how consumers are faring. Both Darden Restaurants (DRI -0.91%) and Nike (NKE 1.29%) rely on consumers being willing to spend money on their products, and both companies have seen a resilient customer base pave the way toward future gains. We'll look at the details below.

Darden looks appetizing

Shares of Darden Restaurants finished higher by 6% on Thursday, jumping to record highs. The restaurant chain operator reported strong fiscal first-quarter results, boosted its outlook, and made some shareholder-friendly moves.

Restaurant with several tables of patrons.

Image source: Getty Images.

Darden's numbers reflected a huge recovery from the pandemic-crushed results of a year ago. Revenue was up 51% year over year, with same-restaurant sales gaining 47.5%. The company's fine dining segment fared the best with comps growth of nearly 85%, while LongHorn Steakhouse saw a 47% gain. Even the Olive Garden restaurant concept posted comps of better than 37%. Earnings more than tripled from year-ago levels.

Darden expects the good times to continue. The company boosted its full-year fiscal 2022 outlook for sales to a range of $9.4 billion to $9.6 billion, with comps expected between 27% and 30%. That would reflect total revenue gains compared to pre-pandemic levels of around 7% to 9%, and Darden believes that adjusted earnings from continuing operations should land between $7.25 and $7.60 per share.

Investors were also pleased about Darden's decision to authorize an additional $750 million to repurchase shares. With the company already having spent $186 million in the past three months to buy back stock, the confidence Darden has in putting its money to work seems to be catching on with shareholders.

Nike gets it done

Nike released its latest earnings after the closing bell on Thursday. After seeing the stock rise more than 1% in the regular trading session, Nike suffered a 2% decline after hours even with solid performance for the athletic footwear and apparel business.

Fiscal first-quarter numbers from Nike showed continued growth. Revenue of $12.2 billion was up 16% from year-ago levels. Nike Direct sales gained 28% on a 29% rise in digital sales, and earnings of $1.16 per share were up 22% year over year.

However, Nike did face some challenges managing costs. Selling and administrative expenses jumped 20% year over year, outpacing revenue growth due largely to increased brand campaign spending on marketing. Investments in digital marketing in particular caused costs to rise. Nike also cited wage-related pressures and higher investments in strategic technology for lifting operating overhead expenses.

Despite the challenges, CEO John Donahoe remained confident about Nike's ability to continue connecting with consumers. With an ongoing strategy aimed at accelerating direct sales of its products to consumers, Nike is looking to eliminate intermediaries and boost profit margins over the long run.

Dan Caplinger owns shares of Nike. The Motley Fool owns shares of and recommends Nike. The Motley Fool has a disclosure policy.

Stocks Mentioned

Darden Restaurants Stock Quote
Darden Restaurants
DRI
$145.65 (-0.91%) $-1.34
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,395.01 (-0.56%) $-194.76
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,076.57 (-0.09%) $-3.54
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,468.00 (%)
Nike Stock Quote
Nike
NKE
$110.77 (1.29%) $1.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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