Nike reported second quarter financial results after the market close on Tuesday that easily beat Wall Street expectations. Investors cheered the news, after last week’s government retail sales report showed consumer spending down sharply. Nike shares rose 13% in after-hours trading.
Revenue for the three months was $13.32 billion, up 17% from a year ago; growth was 27% excluding currency changes. It topped the forecast of $12.57 billion. The strong showing was led by North America, where sales rose 30% to $5.8 billion. The Asia Pacific and Latin American market was up 19%, followed by Europe at 11%. China, the company’s third biggest market, was off 3%, but it was an improvement from last quarter when revenue dropped 16% from the impact of COVID lockdowns.
Nike CEO John Donahoe reiterated the company’s focus on the direct-to-consumer market in the company’s earnings call. “Having a direct connection with consumers avoids the risk of disintermediation,” Donahoe said. “With a consumer base that comes directly to our app, to our website, and to our own and partner stores, we alongside our partners are in a position to control our own destiny.”
Earnings per share were $0.85, only 2% ahead of last year, but it was 31% ahead of the expectation of $0.65. Earnings also beat the estimate by 31% in the same quarter a year ago. Net income was $1.33 billion.
Inventories remained elevated, but the company said it was executing its plan to implement an aggressive promotional strategy to liquidate merchandise that arose after first quarter earnings. Inventories are still 43% higher than a year ago, but the company says those comparisons are distorted by Vietnam factory closures.
In its outlook, the company says it sees “strong consumer demand” and anticipates full-year revenue to grow in the “low teens” versus prior guidance of growth in the low double digits.
Nike is the largest sports apparel and footwear company in the world with a market cap of $180 billion. Trailing 12-month revenue is $49 billion.
Even after Tuesday’s after-hours stock jump, shares are still down 30% year-to-date.