As Footwear News reports, the athletic giant on Monday reported revenues of $10.9 billion for Q3, up 5% year over year and 8% on a currency-neutral basis. This beat estimates of $10.59 billion in revenues from a Yahoo survey of analysts and was driven by Nike direct growth of 17%. Net income was $1.4 billion, down 4% year over year. Diluted earnings per share were 87 cents, which also beat analysts’ predictions of 71 cents.
“Nike’s strong results this quarter show that our Consumer Direct Acceleration strategy is working, as we invest to achieve our growth opportunities,” said Nike CEO and president John Donahoe. “Fueled by deep consumer connections, compelling product innovation and an expanding digital advantage, we have the right playbook to navigate volatility and create value through our relentless drive to serve the future of sport.”
Nike shares were up over 4% in after-hours trading on Monday.
The beat comes amid an ongoing supply chain crisis that has negatively impacted results for the footwear and apparel industries. Previously, months-long factory closures throughout last summer and beyond led to almost two months of no unit production in Vietnam for Nike. Given the headwinds, analysts were overall skeptical about Nike’s ability to fully recover in Q3.
Nike’s positive performance was driven by strong results from its digital and DTC business. Nike’s direct sales were $4.6 billion, up 15% on a reported basis and up 17% on a currency-neutral basis. Nike’s digital sales grew 19%, driven by a 33% growth in North America. Sales in Nike-owned stores were up 14% while wholesale revenues declined 1% on a reported basis but were up 1% on a currency-neutral basis.
These gains were offset by wholesale and digital declines in Greater China.
“Nike continues to execute through external headwinds and global crosscurrents,” explained Stifel analyst Jim Duffy in a note last week. “Big picture, we are emboldened by the pace of DTC shift and digital engagement and expect the shift in consumer behavior accelerated by exceptionally lean marketplace inventories.”
Nike’s DTC channels have also been bolstered by the company’s move to terminate wholesale accounts with retailers like Zappos, Dillard’s, DSW, Urban Outfitters, Shoe Show and more. Nike has also cut back on the amount of product it is offering in existing vendors, such as Foot Locker, to consolidate distribution in its own channels.
“Our third quarter results demonstrate Nike’s ability to navigate through volatility, while continuing to serve consumers directly and digitally, at scale,” said CFO Matt Friend. “Marketplace demand continues to significantly exceed available inventory supply, with a healthy pull market across our geographies.”