Earnings Results: Nike sales growth slows amid supply issues, but earnings beat expectations


Nike Inc. sales grew slower than expected in the heart of the holiday season, as disruptions in its supply chain made delivering goods to North America more difficult.


on Thursday reported fiscal third-quarter earnings of $1.45 billion, or 90 cents a share, up from $847 million a year ago. Nike’s sales reached $10.36 billion, up from $10.1 billion in the same period last year but lower than expectations. Analysts on average expected earnings of 76 cents a share on sales of $11 billion, according to FactSet.

Nike’s sales declined year-over-year for two consecutive quarters in 2020, as the COVID-19 pandemic shut down stores. Revenue growth bounced back in the fiscal second quarter, however, when the athletic-apparel company reported record quarterly revenue of $11.2 billion in a period that included Black Friday sales.

Sales growth slowed down in the most recent quarter, though, as the company was hampered by supply-chain issues, most notably moving merchandise from Asian factories to North America. Executives cited “disruption related to the COVID-19 pandemic, particularly in North America and EMEA” in the announcement.

“North America revenues declined 11 percent on a currency-neutral basis, largely driven by global container shortages and U.S. port congestion, which delayed the flow of inventory in the third quarter by more than three weeks, impacting timing of wholesale shipments,” Nike disclosed.

Stifel analysts wrote this week that the supply issues could “be a near-term challenge to sales.”

“Shipping container availability and port congestion is limiting the flow of goods to wholesale customers and end consumers,” they wrote, while maintaining a buy rating and $168 price target. “This dynamic is most notable in North America, where labor restrictions at West Coast ports related to COVID-19 have caused time delays and cost pressure to get goods into the distribution networks.”

Thursday’s results captured most of the holiday-shopping period, running from Dec. 1 through the end of February, and also showed slowing gains in e-commerce sales. Nike disclosed Thursday that digital sales increased 59%, after reporting 84% growth in the previous quarter and percentage growth of about 80% in the two quarters before that.

The company has focused on building its direct-to-consumer online sales capabilities in the past year, especially for high-demand products such as Air Force One sneakers, as sales through retailers can lead to lower margins and average selling prices. Nike said Thursday that direct sales grew 20% in the quarter, after 32% growth in the previous quarter.

Nike did not disclose its forecast for the fiscal fourth quarter, but typically shares that information on a conference call related to their earnings report. Executives plan to host the conference call at 5 p.m. Easter.

Nike also announced that it will resume share repurchases, after halting its buybacks in last March.

Nike shares initially fell about 3% in after-hours trading immediately following the release of the results, but then bounced back close to even. Shares closed Thursday with a 1.1% decline at $143.17, and have gained 110.4% in the past year, as the S&P 500 index

increased 65.7% and the Dow Jones Industrial Average

— which counts Nike as one of its 30 components — grew by 65.9%.

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