Whatās Going On Here?Nike put its signature swoosh to use earlier this week, as the worldās largest athletic brand crossed āreporting better-than-expected resultsā off its remaining tasks for the year. What Does This Mean?Nike had a lot on its plate coming into last quarter, including hefty production delays after a Covid outbreak shut its Vietnamese factories ā yup, the ones that makes about half of its shoes. That really hurt its Asian sales: in China, for example, Nike brought in 20% less revenue last quarter versus the same time last year.
But donāt feel too sympathetic: Nike still managed to get enough goods to the US to meet strong demand, so revenue in North America ā the companyās biggest market ā grew by 12% last quarter. Mix in that the athletic giant continued to distance itself from discount-happy wholesale partners ā pushing more sales through its own channels instead ā and youāll see how revenue from direct sales grew by 9% last year. All in, then, overall profit jumped by a better-than-expected 7% last quarter versus last year, and investors sent Nikeās shares up 3%. Why Should I Care?The bigger picture: Nikeās ticking off the metaverse.
Looks like Nike wants a run at the fast-growing metaverse: the company announced last week that it had bought virtual sneaker company RTFKT. And since digital goods cost a lot less to make than physical ones, this could signal the start of a highly profitable revenue stream for the company ā and one that isnāt affected by supply chain issues either.
Zooming out: Chinaās losing pace.
Nikeās not the only company seeing lower sales in China: data out last week showed that Chinese retail sales grew by less than expected last month, adding to worries that the worldās second-largest economy is slowing down. But this might help: the countryās central bank cut an important interest rate earlier this week, and since banks use it to price their loans, that could help boost spending and reinvigorate the economy. | 