What’s Going On Here?Just when the odds seemed stacked against Nike, the sporting goods giant made a last-minute surge late on Tuesday with a better-than-expected quarterly profit – and an inspirational game plan for how to beat its viral rival. What Does This Mean?Nike’s revenue last quarter was 5% higher than a year ago, but its profit fell by 23%. Sales in China, meanwhile, dropped 5%, but even they’ve started picking up since the country made it past the worst of the coronavirus disruptions (tweet this).
Better yet, Nike’s figured out a three-stage game plan to surviving coronavirus. Stage one: the sports brand shuts its stores to stem the spread and relies instead on ecommerce orders (which might be why they rose 30% in China last quarter). Stage two: physical stores reopen, albeit with sluggish sales and nervous customers. And stage three: Nike’s physical and online sales get back to normal as consumers pick up where they left off. Good hustle. Why Should I Care?For markets: The Nike uptick.
Nike’s stock initially rose around 10% on Wednesday, maybe because the company’s beyond the worst of the disruptions in China – one of the world’s fastest-growing sports markets and therefore super important to Nike’s future growth. And while Nike’s had to shut down its stores across the US – the brand’s biggest market, contributing 40% of revenues – investors might now be hopeful it’ll emerge without too much damage done to its earnings.
The bigger picture: Copy and paste.
Nike’s game plan might help guide other global consumer firms and give them the confidence to update – rather than withdraw – their earnings predictions for this year. That could in turn encourage their investors to stick with them no matter how tough things get. Any investor looking for new opportunities in the retail industry, meanwhile, might want to pay attention to Goldman Sachs’ recent analysis: the investment bank reckons cut-price retailers should do well in this environment, but apparel brands and department stores might struggle. | 