Nike’s Stock Sprints Higher After Upbeat Earnings Run

Shares of sports apparel producer Nike (NYSE: NKE) were soaring Wednesday after the company reported a spike in its latest quarterly sales.

A recent uptick in interest and participation in sports-related activities has generally helped propel Nike’s global sales performance.

In its first fiscal quarter of 2020, the company’s revenues rose 7% year-on-year to US$10.7bn, driven by growth across all regions, led by its international business, which grew 16%.

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The firm’s gross margin increased 150 basis points to 45.7%, mainly on the back of higher average selling prices and margin expansion in NIKE Direct. This was partially offset by adverse foreign currency exchange rates and higher product costs.

Together, the increased sales and gross margin expansion helped drive Nike’s net income 25% higher to US$1.4bn, with diluted earnings per share up 28% to US$0.86.

In response, Nike’s stock led the consumer discretionary sector, surging more than 5.25% intraday Wednesday to a new 52-week high of around US$91.78, according to the IBKR Trader Workstation (TWS).

The S&P 500 was last up around 0.3% to 2974.90.

Hitting a Stride

Nike also appears to be operating with optimism about its digital capabilities, as well as rosy sentiment about growth in the sportswear industry.

The firm noted that it scored “a very strong” 42% growth rate in digital, “showing the power of more personal relationships with the consumer.”

Meanwhile, according to market research firm Grand View Research (GVR), the global sportswear market is expected to register a compound annual growth rate (CAGR) of 10.4% from 2019 to 2025. Its size was estimated at US$239.78bn in 2018.

GVR noted that increasing awareness about leading “a healthy lifestyle and about the health benefits of fitness activities, such as swimming, yoga, running, and aerobics, are expected to drive the market,” as well as the increasing “popularity of sports events, such as Soccer World Cup, Olympic Games, and Cricket World Cup.”

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DISCLOSURE: AUTHOR SECURITY HOLDING: NO POSITIONS

The author does not hold any positions in the financial instruments referenced in the materials provided.

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