Nike shares are trading higher after-hours: here’s why

Nike Inc (NYSE: NKE) said its profit and revenue came in better than the Wall Street estimates in the fiscal second quarter. Shares jumped more than 5.0% after-hours.

Key takeaways from Nike’s Q2 report?

Nike reported $1.30 billion in net income that translates to 83 cents per share. In the same quarter last year, it had posted just over $1.21 billion or 78 cents per share. At $11.40 billion, its quarterly sales noted an annualised growth of 1.0%.

According to FactSet, experts had forecast 63 cents of EPS on $11.25 billion in sales. In the earnings press release, CEO John Donahoe said supply and production-related bottlenecks improved for Nike in the recent quarter.

Nike’s strong results this quarter provide further proof that our strategy is working, as we execute through a dynamic environment. We are now in a much stronger competitive position today than we were 18 months ago.

The financial report comes only days after Nike acquired RTFKT.

Siegel’s take on the weakness in China

Nike’s sales in Greater China printed 24% down. On CNBC’s “Closing Bell”, BMO Capital Market’s Simeon Siegel said:

The question is, does that China weakness persist? In H1, if we look at North America strength and the gross margin beat, that’s a really good number. But it is a growth market for Nike and will remain in focus. A stumble in China would be a problem. Doesn’t look like a problem right now, though.

According to Siegel, weakness related to consumer demand is not a threat for Nike, thanks to its unmatched scale. If it’s more “structural”, though, the story could be different. He, however, is convinced the weakness will turn out to be “transitory”.

What else was interesting?

Revenue from Nike’s namesake brand remained unchanged on a year-over-year basis, but Converse registered a 16% growth. Gross margin printed at 45.9% – a 280 basis points increase.

Nike valued its cash, equivalents, and short-term investments at $15.1 billion versus about $11.8 billion in the same quarter last year. The footwear manufacturer returned roughly $1.4 billion to shareholders in Q2, including $437 million in dividend (14% up) and $968 million in share buybacks.

Nike’s second-quarter covered Black Friday, but the remainder of the holiday season will fall in its Q3. Last month, the American multinational partnered with Roblox to position itself to benefit from the metaverse.