Did Nike Just Give Investors What They've Been Waiting For?

The stock market wasn't able to keep up its positive momentum on Monday, even after an extremely strong performance last week. Investors remain uncertain about how the economy will perform between now and the next time the Federal Reserve meets to discuss interest rate policy. By the end of the day on Monday, major market benchmarks were modestly lower, with the drops in the Dow Jones Industrial Average (^DJI 0.69%) and S&P 500 (^GSPC 1.20%) being somewhat smaller than that of the Nasdaq Composite (^IXIC 1.59%).

Data source: Yahoo! Finance.

One thing that investors have been waiting to see is how companies are faring in this difficult economic environment. Although earnings season doesn't start up in earnest until mid-July, a couple of high-profile companies are a bit earlier to the game. After the market closed, Nike (NKE -0.18%) announced its latest quarterly results, and investors were hoping that what the athletic footwear and apparel pioneer said would be exactly the impetus that Wall Street needed in order to get back in a bullish mood.

Did Nike get it done?

Nike's stock didn't make a major move in after-hours  trading following its earnings announcement late Monday. After the stock fell more than 2% in the regular trading session, Nike's shares moved higher by less than 1% in the wake of its latest news.

Nike's fiscal fourth-quarter results for the quarter ending May 31 looked weak on their face. Revenue for the quarter was down 1% to $12.2 billion, with currency impacts costing the company four percentage points of potential growth. Net income fell 5%, resulting in a 3% year-over-year drop in earnings per share to $0.90. Gross margin fell on cost pressures for freight and logistics, and higher overhead expenses also weighed on profitability.

The news for the full 2022 fiscal year was somewhat better. Revenue overall rose 5% to $46.7 billion, with double-digit percentage gains for the Nike Direct segment. Digital growth and Nike-branded stores both made significant contributions to the retail company's  success. Nevertheless, a big rise in selling and administrative expenses limited earnings growth to 5%, with the final numbers weighing in at $3.75 per share.

CEO John Donahoe stuck to his narrative, noting that Nike's continuing attempt to take full advantage of its brand power through its digital channels is paying off. The executive is also pleased at the lineup of new and innovative products that should help bolster Nike's appeal in the months to come.

Shareholder-friendly moves

In addition to the news about the business, Nike upped the ante on its commitment to shareholder-friendly behavior. The company's board of directors announced a new $18 billion stock repurchase program, which will allow for share buybacks over the next four years. Given that the company's market capitalization has fallen to below $175 billion, that amount potentially represents fully 10% of Nike's outstanding shares.

Overall, Nike has been increasingly good about returning capital to shareholders. Just in the past year, stock buybacks have amounted to $4 billion, with Nike purchasing 27.3 million shares. Moreover, investors received dividends totaling $1.8 billion, which was 12% higher than what Nike paid in fiscal 2021.

Currency impacts and rising overhead costs are problems plaguing much of retail, and Nike's inability to overcome them fully won't entirely resolve broader concerns among those following the industry as a whole. However, the latest report does affirm that Nike remains committed to its strategy of taking out intermediaries between the company and its customers, and that appears likely to remain a popular trend not just for the athletic apparel giant, but also the broader retail community.