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Nike Dashing Toward a Brighter Future: Here's How

Nike reported record-high fiscal 2020 first-quarter earnings that easily surpassed estimates. Digital sales and kids shoe business in particular boosted sales. Moreover, the company has chalked plans to grow further with the help of Nike Digital and use top athletes to promote its products. Thus, if you want to invest in Nike, here’s what you should note.

Nike’s Shares Move North

On Sep 24, NIKE, Inc. NKE reported fiscal first-quarter earnings of 86 cents per share, beating the Zacks Consensus Estimate of 71 cents per share. It also posted revenues of $10.66 billion, surpassing the Zacks Consensus Estimate of $9.95 billion. After the report, Nike’s shares jumped more than 5.5% in after-hours trading as per CNBC.

The company’s CEO Mark Parker credited digital sales, product innovations and back-to-school sales for the better-than-expected earnings. On the earnings call, he mentioned that online sales soared 42% in Q1, and a significant rise was seen in the sales of women’s shoes.

Nike traditionally sold shoes through retail stores worldwide, but in recent years with its "Consumer Direct Offense" strategy, it was trying to provide personalized products to consumers. Thanks to the success of this strategy, digital sales grew 42% as its flexible, fast and interactive cloud-based architecture has attracted more customers, making Nike digital a super hit.

Moreover, with August being the month when children get back to school for the new term and Nike launching its first subscription service for kids in the quarter, the Nike Adventure Club sales had only one way to go, and that’s upward. Children’s sneakers seem to have fueled the kids shoe business giving the company the biggest back-to-school season in history.

Nike also took a step toward making gears for women and it earned four times higher revenues from sponsoring the Women's World Cup this year compared to the last. In fact, Nike has hooked in tennis champion Serena Williams as its ambassador. Both factors contributed positively towards the women’s shoe business, helping it rise double digits.

However, the limelight of this quarter’s earnings is on Nike’s Air Max React product line, specially the Air Max 270 that boosted sneaker sales by triple digits. Such solid results have certainly helped Nike’s shares gain traction. After all, the company has outperformed the Shoes and Retail Apparel industry over the past three-month period (+5.6% vs 5.3%).

Is the Future Even Brighter?

Nike’s future plans should also help the company surpass its own records to reach to greater heights. With the “plus-size” line, Nike will likely be able to attract athletes and with its digital channel it can help customers grab shoes that can be personalized as per their size and taste.

Further, Nike’s Jordan line will have new designs that will attract athletes as NBA rookie Zion Williamson will be playing the upcoming season wearing the Air Jordan 34, Nike’s signature Air Jordan basketball shoe. Nike will be working closely with Zion in the development of the apt shoe for basketball and this should surely boost sales.

Last but a major come back in the shoe world can be seen with demand for the converse brand growing in Europe. A growing trend in fashion spurs demand, and it is quite obvious that higher demand will definitely bring drive sales.

Nike is also trying to bring innovation in its sports apparel section giving tough competition to Under Armour, Inc. UAA and Lululemon Athletica Inc. LULU. What’s more, Nike has a Growth Score of A. The company’s expected earnings growth rate for the current year is 16.1% which is above the estimated 10% growth rate of the Zacks Shoe and Retail Industry industry.

Nike, currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Click to get this free report lululemon athletica inc. (LULU) : Free Stock Analysis Report NIKE, Inc. (NKE) : Free Stock Analysis Report Under Armour, Inc. (UAA) : Free Stock Analysis Report To read this article on click here. Zacks Investment Research