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Nike's digital transformation 'is just getting started': UBS' Jay Sole

Yahoo Finance’s Brian Sozzi and Alexis Christoforous discuss Nike's latest earnings report with UBS Executive Director, Jay Sole.

Video Transcript

ALEXIS CHRISTOFOROUS: Nike is making a lightning comeback after being hit hard by the coronavirus pandemic. The company beat estimates in its Q1 earnings report, posting revenue of $10.6 billion, and its online sales skyrocketed 82%. I want to bring in UBS executive director Jay Sole to break this down for us. Jay, good to see you here this morning. I guess for investors, the question is, how long can Nike keep this kind of momentum going?

JAY SOLE: Well, Alexis, thanks for having me. And I think Nike can keep this momentum going for a long time, actually. I think that the digital transformation that you're speaking to is really just getting started, and Nike's ability to continue to drive sales and margin expansion because of it isn't really just a this year thing. It's more of a next year and even a year after that opportunity.

BRIAN SOZZI: Jay, throughout the earnings call last night, one thing stood out to me among many-- this consistent mention of them gaining market share. Who are they gaining market share from, and why is this happening?

JAY SOLE: Well, Brian, it's a great point. And I think that's one thing that's probably overlooked about Nike's success, that it's not just about being able to sell more goods online. Nike has more product innovation than really all the other companies, especially in footwear. But not just in footwear, it's also apparel. So when you think about all the competitors, whether it's, you know, Adidas or Puma or, you know, Sketchers, like all of the big footwear companies really don't-- can't match Nike in terms of the innovation.

You know, last night, they talked about innovation in their running shoe platform. They talked about their Space Hippie, which is their completely-- their shoe made completely from sustainable materials. You know, they talked about in apparel, their new maternity line for women. There's a lot of things that Nike is doing. And really, from what I can remember going back, say, 20 years from covering the stock, there's more innovation right now happening at one time than I can ever remember. And that's really why they're taking share.

ALEXIS CHRISTOFOROUS: What about the Nike Run Club app? How is that doing against other apps like, say, the Peloton app?

JAY SOLE: Well, Alexis, that's a great question. And you know, what's funny about the Nike Run Club and the Nike Training Club is that if you look at the downloads of those apps versus, say, the Peloton app-- and you know, the UBS Evidence Lab does a great analysis of this-- the Nike Training Club app is like the fourth most downloaded app in the United States right now. You know, and Peloton is, like, in the mid-30s. And the Training Club is the same way, and the sneakers app and just the regular Nike shopping app is the same way.

So really, Nike is dominant on digital. Those apps, not only are they some of the most downloaded apps right now, but they've been the most downloaded apps for about six years by how we measure the data. So I think it just speaks to Nike's digital dominance, and I think what the quarter showed is that they're able to take that engagement they have with consumers on those apps and turn it into sales. And that's pretty unique, that a lot of other brands haven't quite figured it out yet.

ALEXIS CHRISTOFOROUS: Unique, indeed. The stock rallying, our number one trending ticker here this morning. Jay Sole of UBS. thank you.

JAY SOLE: Thank you.