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Nike brand digital sales jump 82% in Q1

Nike shares were immediately higher in after-hours trading after reporting earnings that blew past estimates. The athletic retailer reported $10.6 billion in revenue, far surpassing Wall Street expectations of $9.1 billion. The Final Round's Seana Smith and Myles Udland break down the numbers.

Video Transcript

SEANA SMITH: Welcome back to "The Final Round." Some breaking news, Nike is out with earnings, Myles. Hows the numbers for us, Myles.

MYLES UDLAND: Yeah, let's go through Nike's numbers quickly here. The company reporting on the top line revenues of $10.6 billion for the most recent quarter. That is far better than the $9.1 billion that Wall Street analysts had been expecting.

Looking over at the bottom line, the company here reporting diluted earnings per share at $0.95. That's against $0.86 for the same period last year. Street estimates had been closer to 48% on an adjusted basis, so it looks like a bit of a discrepancy there. But again, Nike reporting earnings per share up about 10% from last year.

Now comparing revenues to the same period last year, down about 1%. Clearly though, the street was looking for a bigger impact on the company's top line there. The company saying in its release, they're recovering faster based on accelerating their digital growth.

And we know so much about how Nike has kind of restructured its groups. New CEO, John Donahoe, has come in and changed the way that, you know, each unit of the company kind of thought about their little fiefdom, so the company here kind of attributing some of that to a better than expected quarter here. And Seana, we'll get you more information on the company's quarter as it comes in.

SEANA SMITH: Well, certainly looks like a strong quarter for the company. When you take a look at the stock reaction, we have shares at nearly 8% after hours. And Dan Roberts, I want to get your thoughts on this report. We know you follow the company very closely.

Myles just going through some of those numbers for us. Nike brand digital sales increasing 82%. And we know, since the start of the pandemic, since before the pandemic, Nike has really been working at streamlining its partners and also doubling down on its digital presence. When you take a look at these numbers, it sure looks like that's paying for the company.

DAN ROBERTS: Yeah, Seana, I mean the biggest story is digital. The biggest story is e-commerce. We knew it would be. And e-commerce, the surge and the sales that we've seen for so many brands has been a big story.

And then the pandemic, of course, for those companies, it was sort of an abnormality. It was a pandemic effect. You know, Best Buy, huge surge in online sales, Urban Outfitters, Etsy, of course, which is an all online business, Target, Walmart. But for Nike, it has been a continuation of a trend that started before the pandemic. It has really focused on e-commerce.

Now, although that-- that's the biggest story to me, but I would look right to the China sales. And we had expected, in fact, that China was going to bounce back here, because of China reopening its retail stores. As Myles mentioned, overall revenue down compared to a year ago, which we expected, down a half of 1%. But in China, revenue up 6% year over year, so I think that's a huge story here as well.

And, of course, North America is much slower, and will continue to be much slower, to bounce back. North America sales down 1.6% year over year. So I think e-commerce is a story, China and the reopening of retail stores there is a story, and then the back to school season was thought to maybe give Nike a boost. I would imagine that we can attribute a lot of the e-commerce of the last two months, and I'm sure we'll hear more about it on the call, to the back to school season.

Now, of course, well, back to school, web school, right, depending on what state you're in. But kids still need their supplies, whether they're staring at a Zoom screen or whether they're going into school three days a week with masks on. So I think Nike's going to continue to bounce back.

And it's interesting too, I want to mention, we just had the CEO of Under Armour on our live show last week. And he was saying, well, everyone is going to be shrinking coming out of COVID, everyone meaning all of Under Armour's peers in the apparel space. Hm, I don't think so though. I don't think Nike's going to be shrinking very much coming out of COVID, especially because we can see how close Nike is to being at the levels it was at before. So I think that was kind of a little bit of Under Armour's newish CEO shunting that off, whereas UA is in a much tougher position right now than Nike and probably than Adidas.

SEANA SMITH: Yeah, Dan, you mentioned Under Armour there. It's interesting. Jared Blikre just put this in our Slack chat, but Under Armour and lululemon, both those stocks getting just around 2% on the heels of this report from Nike. So we're seeing some of its competitors also moving to the upside on these strong numbers.

And guys, I'd love to get your thoughts on this, because Dan brought up China. That was clearly an area of focus for the company going forward. And digging through these results just a little bit more, I mean, the footwear sales from a year ago in China jumping 7%, apparel up 3%, equipment up 2%, total, like Dan said, up 6% in year over year change.

And really this area a focus for the company. We know so much has been placed, so much emphasis has been placed on China and the future growth prospects there. And it seems like it's certainly at least trending in the right direction for Nike.

- Yeah, certainly. And as we've seen also with other companies as they've talked about the recovery amid COVID-19, Asia, China being one of the places where they've really seen an uptick. So it kind of jives with what we've seen with other companies as well, where they're seeing an increase in China. And as you mentioned, in e-commerce, it's all in line with the-- with that recovery, where China is the area where they're seeing the recovery first.

SEANA SMITH: Yeah, they certainly are. But again looking at the stock's reaction to this report, initially popping just around 8%. I'm pulling it up right now. Looks like the stock up just around 7% at $125, so certainly a name that investors will be closely watching as we turn our focus to tomorrow's opening bell.