Factory closures in Asia "will lead to lower revenue growth and some product shortages for the rest of Nike’s fiscal year," as the company "revised its estimate of second-quarter revenue to be flat or down slightly," according to Jeff Manning of the Portland OREGONIAN. Indonesia and Vietnam "both shut down footwear factories in an attempt to tamp down outbreaks of COVID-19." Indonesia has since "reversed course and is allowing the facilities to reopen." Vietnam "remains shut down." Nike CEO John Donahoe told analysts that it’s "impossible to predict exactly when things will return to normal" (Portland OREGONIAN, 9/23). CNBC.com's Lauren Thomas noted Nike shares "dropped more than 3% in extended trading Thursday" after reporting its Q1 earnings. The brand's earnings per share were $1.16 compared to Wall Street expectations of $1.11, and Nike saw revenue of $12.25B against an expected $12.46B. Nike now "expects full-year sales to increase at a mid-single-digit pace, compared with a prior outlook of low double-digit growth." Analysts had been "looking for revenue growth of 12% for the year, as well as a 12% increase for the second quarter, according to Refinitiv data" (CNBC.com, 9/23). At presstime, shares of Nike were trading at $149.06, down 6.5% from close of business Thursday.
NOTHING TO WORRY ABOUT? CNBC’s Sara Eisen said “gross margins were solid," which “speaks to the pricing power that Nike currently has." Eisen: "The brand heat is there and it is very much intact, but the supply chain is the issue. ... It’s not the demand that’s the problem. The brand looks very strong, the numbers look pretty decent. It’s just those temporary issues that it has to get through.” CNBC contributor Guy Adami said Nike had a “fine quarter” and the company “spoke to exactly the problems that they’re having.” Seymour said “investors can focus on the profitability of the business … in the sense these guys are really in control of their destiny” (“Fast Money,” CNBC, 9/23). However, CNBC’s Jim Cramer said, "I’m worried about Nike because this China number, which they are portraying as being a supply problem, I think is a demand problem” (“Squawk on the Street,” CNBC, 9/24).
GROWTH IN NORTH AMERICA: WOMEN'S WEAR DAILY's Kellie Ell noted Nike’s direct-to-consumer business rose 28% during Q1, year-over-year," to $4.7B, thanks to "strength in Nike’s brick-and-mortar retail fleet, which exceeded pre-pandemic levels." Digital sales also "increased during the quarter," up 29%. The North American digital business "rose the most" -- 43% during the quarter -- compared with FY '21’s first quarter. By category, the "biggest revenue gains were in footwear, followed by apparel and then equipment." Donahoe said that the company expects the "majority of its revenue growth to come from digital sales" in FY '22, but added that the company "will continue to invest in brick-and-mortar retail." Donahoe added that "growth opportunities include children’s, women’s apparel, such as sports bras and yoga and sustainability" (WWD.com, 9/23).