Shares of Nike (NKE 0.80% ) fell 6.2% on Friday following the release of the sportswear titan’s fiscal 2022 first quarter results and subsequent conference call.
Nike revenue grew 16% year over year to $12.2 billion. The gains were fueled by a 28% increase in Nike’s direct sales — which include physical retail stores and company-owned digital channels — to $4.7 billion.
“Nike’s strong results this quarter are continued proof of our deep relationships with consumers, our pipeline of relentless innovation and a digital advantage that fuels our brand momentum,” CEO John Donahoe said in a statement. Press release.
Even better, gains from Nike’s higher-margin direct-to-consumer business helped boost its overall gross margin by 1.7 percentage points to 46.5%. That contributed to a 22% rise in the company’s earnings per share to $1.16.
“Our first quarter results illustrate how Nike’s direct-to-consumer acceleration strategy continues to fuel growth and transform our long-term financial model,” said Chief Financial Officer Matt Friend.
Investors, however, seemed to be focused on Nike’s reduced sales forecast for the full year. Friend told a conference with analysts that coronavirus-related shutdowns in Vietnam and other countries were causing delays in its supply chain. These production challenges will likely lead to stock-outs in the coming months. Management, in turn, now expects Nike’s revenue growth to grow in “mid-single digits” rather than its previous estimate of low double-digits.
Still, these supply chain issues are expected to be transitory, and management remains confident in Nike’s long-term future. “Our competitive advantages, including our innovative product, brand strength fueled by compelling storytelling, our roster of the world’s top athletes and, increasingly, our industry-leading digital experiences in retail, will continue to create a separation,” Donahoe said.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.