Hot Retail Stock to Watch: Nike Inc (NYSE: NKE)

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Nike Inc (NYSE: NKE) stock rose over 4% on December 21st, 2020 (As of 10:06 am GMT-5; Source: Google finance) after the company posted better than expected results for the second quarter of FY 21. In Q2, Greater China rose 19% on a currency-neutral basis and 24% on a reported basis, driven by a triumphant Singles’ Day in which NIKE yet again was the number one sport brand with the highest store demand and highest traffic on Tmall.

In North America, Q2 revenue rose 1% and includes non-comparable items in the prior year such as the sale of Hurley and the transition of the NFL License business to Fanatics and Q2 EBIT increased 7% on a reported basis.

In EMEA, Q2 revenue rose 12% on a currency-neutral basis and EBIT increased 29% on a reported basis. Further, in Q2, the momentum continues with 80% NIKE Digital revenue growth on a currency-neutral basis and the company has increased the digital penetration further by improving product availability through search optimization, moving inventory across marketplace channels and increasing digital fulfillment capacity through scale and automation. NIKE Direct rose 25% on a currency-neutral basis and wholesale grew 6% in the quarter led by strong double-digit strategic partner growth in JD Sports and Zalando, partially offset by double-digit declines in undifferentiated wholesale. By the end of Q2 through intentional supply and demand management actions, marketplace health has been restored across all geographies without compromising the value of the brands and product franchises, and NIKE-owned inventory is clean, ending Q2 down 2%.

NKE in the second quarter of FY 21 has reported the adjusted earnings per share of 78 cents, beating the analysts’ estimates for the adjusted earnings per share of 62 cents. The company had reported the adjusted revenue growth of 9 percent to $11.24 billion in the second quarter of FY 21, beating the analysts’ estimates for revenue of $10.56 billion, according to IBES data from Refinitiv. This is as NIKE Direct grew 30% led by strong NIKE Digital growth of 80% and partially offset by declines in the wholesale business. Gross margin contracted by 90 basis points in Q2 versus the prior year, on the back of higher promotional activity to reduce excess inventories. The performance in the second quarter was affected due to nonrecurring costs associated with the organizational realignment, which reduced gross margin by approximately 30 basis points. SG&A fell 2% in the quarter as disciplined expense management and lower marketing spend on brand and sports events was partially offset by increased investments in digital marketing.

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