Nike stock soars. Yes, his earnings were that good.

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Nike

Shares jumped more than 10% after hours on Tuesday following the athletics giant’s better-than-expected fiscal first-quarter earnings report.

This is a welcome rebound from the company’s previous quarter and shows how Nike’s e-commerce strategy continues to gain momentum.

Nike (ticker: NKE) said it earned an adjusted 95 cents per share on revenue that fell 1% to $10.6 billion. Analysts had expected Nike to earn 46 cents per share, on revenue of $9.1 billion.

While nearly all Nike-owned stores were open during the period, the company said traffic to brick-and-mortar locations was lower year-over-year due to Covid-19. Placer.ai data showed that foot traffic at Nike stores fell an average of 37.6% year-over-year in June, July and August, but it improved: the week of August 31, traffic was down only 17.3%. Nike noted that this was somewhat offset by growth in digital revenue from the Nike brand, which jumped 82% in the quarter.

Revenue remained broadly stable on a currency neutral basis, as with the Nike brand; Converse increased its revenue by 2%. Sales in Europe, the Middle East and Africa returned to 5% growth, with a triple-digit increase in digital sales, while revenue in Greater China increased by 6%. China and North America saw double-digit increases in e-commerce.

Shares of Nike rose 14% to $132.70 late in trading on Tuesday after closing more than 3% higher in the regular session.

In some ways, these results were a repeat of the previous report: physical store closures weighed on sales growth, even as online revenues jumped.

Still, the results were significantly different, which explains why the stock reacted positively this time, unlike the previous quarter. Even with Covid-19, Nike was able to beat consensus estimates, and although gross margins fell again, to 44.8%, this metric was also sequentially higher.

Additionally, digital sales growth of 82% exceeded the company’s 75% increase in its fourth fiscal quarter. This speaks to the continued success of the company’s direct-to-consumer (DTC) strategy, which focuses on Nike.com and has become even more relevant in the age of Covid.

“It’s no surprise that we’re seeing Nike start to bounce back and exceed expectations,” said Sabrina McPherson, chief executive of Publicis Sapient. Barrons in an email. “His leadership position in digital investments and his continued commitment to directing the customer experience have provided the foundation to address the sustained shifts in shopping behavior that the pandemic has accelerated…they are well on their way to writing the playbook on using digital to meet consumers where they are with what they want.

Additionally, while Nike hasn’t been shy about taking a stand on social justice issues, it could actually help the company, notes Mousumi Behari, head of digital strategy practice at Avionos. “Nike has a strong brand presence and following, and they haven’t been afraid to express which side of the issue they’re on, as their Colin Kaepernick campaign shows. engaging with its customers, which results in more online sales.

Write to Teresa Rivas at [email protected]

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