Here’s why Nike Stock fell today

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What happened

Shares of Nike (NYSE: NKE) fell on Friday after the company announced its financial results for the third quarter of its fiscal year 2021. It increased both revenue and profit from a year ago, but not as much as Wall Street had expected . For this reason, Nike stock was down 4% at 10:45 a.m. EST today.

So what

For the third quarter, Nike reported revenue of $10.4 billion, technically up 3% year-over-year. But there are some significant clarifications to be made. First, taking into account currency fluctuations, the company’s revenues decreased by 1%. Second, Nike brand sales were down 2% after adjusting for currency fluctuations; Growth came from the company’s Converse brand, which grew 8% from a year ago. And third, analysts were expecting revenue closer to $11 billion, so these early results were well below expectations.

Image source: Getty Images.

Nike had a perfectly reasonable explanation for the shortfall. In the third trimester conference call, Chief Financial Officer Matthew Friend said, “In the third quarter, global supply chain disruption due to container shortages, transportation delays and port congestion interrupted the flow of inventory supply. As a result, Nike experienced delays of more than three weeks in some cases, which in particular hurt its wholesale business.

Now what

Although Nike’s revenue is slightly below investors’ hopes, don’t discount the bottom line. The company reported net income of $1.4 billion, up 71% from a year ago. Additionally, the company now has cash, cash equivalents and short-term investments of over $12.5 billion. He had taken a break share buybacks last year due to the uncertainties surrounding the pandemic. But given its exceptional financial situation and improving operating metrics, Nike is ready to start buying back shares again in the fourth quarter.

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Jon Quast has no position in the stocks mentioned. The Motley Fool owns stock and recommends Nike. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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