Nike 3Q revenue tops expectations as surge in China digital sales helps offset store closures

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Nike (NKE) reported fiscal third-quarter sales that topped expectations, reflecting ongoing strength through February even as the coronavirus outbreak generated a host of disruptions for the athletic-wear maker.

Here were the main results from the report, compared to consensus data compiled by Bloomberg:

  • Revenue: $10.1 billion vs. $9.55 billion expected

  • Earnings per share: 53 cents vs. 53 cents expected

  • Gross margin: 44.3% vs. 44.2% expected

Shares of Nike rose 6.2% in late trading to $76.79 each, as of 4:44 p.m. ET.

“In an extraordinarily dynamic time, Nike’s strong results are testament to our deep consumer connections, compelling product innovation and agile teams around the world. We know it’s in times like these that strong brands get even stronger,” CEO John Donahoe said in a statement. “As we start to see recovery in China, no one is better equipped than Nike to navigate the current climate.”

In February, Nike had said it anticipated a “material impact” on its operations in Greater China due to the coronavirus outbreak taking place there early in the year. Nike closed the bulk of its locations and cut store hours at others in China during the height of the outbreak. Most physical locations there returned to normal operations by mid-March. Nike derived 16% of revenue from Greater China in 2019.

While Nike’s brick and mortar retail sales were impacted by the temporary store closures, a surge in e-commerce sales helped stem sales declines in the region. Digital sales jumped more than 30% in Greater China during the quarter, which the company attributed to strong conversion as customers logged onto Nike’s digital app for at-home workouts. But overall, revenue from China dropped 4% on a currency-neutral basis, snapping a 22-quarter streak of double-digit percentage growth.

NEW YORK, NY - DECEMBER 20: Nike sneakers are seen on display at the Nike flagship store on 5th Ave. on December 20, 2019 in New York City. Revenue in the North American market, which accounts for the majority of Nikes sales, rose 5% from a year ago. The company said its Jordan brand had its first ever billion-dollar quarter. (Photo by Stephanie Keith/Getty Images)

Still, Nike managed to sell more than $1 billion worth of footwear in China during the third quarter, or 3% less than the prior year, excluding currency effects. And China’s equipment sales actually rose 7% over last year, despite fears that the coronavirus would drive consumers away from purchasing non-essential goods.

For the current quarter, Greater China sales will likely be roughly flat compared to last year, CFO Andrew Campion during a call with analysts Tuesday. Campion said Nike would not be providing overall fourth-quarter guidance due to uncertainty over the coronavirus outbreak.

In another update Tuesday, Donahoe said Nike was exploring making personal protective equipment like face shields to assist health-care workers on the front lines of the pandemic.

For the current quarter, Nike will be contending with even more store closures as the coronavirus outbreak grips countries around the world. Earlier this month, the company temporarily closed all 384 retail locations in the U.S., along with stores in Canada, Western Europe, Australia and New Zealand, until March 27. These closures were not reflected in results for the most recently reported quarter, which ran through the end of February.

Once a consistent outperformer, the athletic-wear maker has so far seen its losses surpass those of the S&P 500 this year. Nike shares dropped nearly 30% for the year to date through Tuesday, versus a 25% decline in the broader market.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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