Retail stock under pressure: Nike Inc (NYSE: NKE)

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Nike Inc (NYSE: NKE) stock lost over 5.6% on 26th June, 2020 (as of 11:16 am GMT-4 ; Source: Google finance) as the company posted lower than expected results for the fourth quarter of FY 20. The firm swung to loss driven by 90% of store closures across North America, EMEA and APLA for roughly eight weeks due to the coronavirus pandemic and fewer shipments to its wholesalers. The company reported the net loss of $790 million in the fourth quarter, compared to the earnings of $989 million, in the year-ago quarter. However, the business direct-to-consumer was solid, as digital sales grew 79% and formed 30% of total revenue, which is a goal that was initially set for 2023. The company surpassed $1 billion in annual digital revenue in both Greater China and EMEA for the first time and reached $5.5 billion for the full year. At the end of Q4, inventory rose 31% versus prior year.

NKE in the fourth quarter of FY 20 has reported the adjusted loss per share of 51 cents, missing the analysts’ estimates for the adjusted loss per share of 8 cents, according to analysts polled by FactSet. The company had reported 38 percent fall in the adjusted revenue to $6.3 billion in the fourth quarter of FY 20, missing the analysts’ estimates for revenue of $7.3 billion.

Moreover, the gross margin contracted by 820 basis points in the fourth quaryer as higher full-price average selling prices, despite increased wholesale discounts, were more than offset by higher product costs, including factory cancelation charges and increased inventory obsolescence reserves, as well as the adverse rate impact of supply chain fixed-costs on lower wholesale shipments due to COVID-19 dynamics. SG&A fell 6% in Q4. The company has reduced costs through clear enterprisewide cost management principles, that includes the reduction of marketing spending due to the cancelation of live sporting events and retail store closures.

Meanwhile, in the fourth quarter, Greater China and South Korea returned to growth. North America, EMEA and the remainder of APLA are still in the recovery phase as stores began to reopen throughout May and early June. In North America, Q4 revenue fell by 46% on a currency-neutral basis. As of today, approximately 85% of Nike-owned stores are open. In EMEA, Q4 revenue fell by 44% on a currency-neutral basis. Digital grew about 100% there with continued brand momentum and significant new member acquisition and engagement across the Nike Training Club and the Nike Running Club apps.

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