Why Nike, Inc.(NYSE: NKE) Stock Is Going Gangbusters Today

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Nike, Inc.(NYSE: NKE) stock rose over 8.9% on 23rd September, 2020 (as of 10:44AM EDT; Source: Yahoo finance) after the company posted better than expected results for the first quarter of FY 21. The company’s revenue trend is improving with the first quarter flat to prior year on a constant currency basis. Greater China, EMEA, Japan and South Korea have already returned to growth. NIKE inventory levels have improved since May, with the first inventory growing 15% compared to the prior year as compared to 31% growth in Q4 and is on track to be normalized in the next 60 days. In the first quarter, NIKE active members rose about 60% with even higher growth in buying members. The company posted strong double-digit growth in contactable members. The company saw owned digital market share gains across both the US and key countries in EMEA.

Meanwhile, in the first quarter, the company had launched Nike (M), NKE’s first dedicated maternity collection. The company had also launched a new NIKE yoga collection that serves all genders and body types with performance fabric innovation that’s the result of more than two years of development. The response to this best-in-class yoga collection has been amazing and is already driving incredible growth for the women’s yoga business. Further, the company’s sustainable footwear platform known as Space Hippie saw amazing sell-through in the highest heat innovation launch ever.

Furthermore, the company had cut purchase orders to recalibrate supply and demand in North America. During the first half of fiscal ’21, the company shifted product allocations to fuel higher demand in NIKE digital and the smaller group of strategic wholesale partners. In North America, Q1 revenue fell 1% on a currency neutral basis and EBIT increased 18% on a reported basis. In EMEA, Q1 revenue rose 5% on a currency neutral basis and EBIT grew 14% on a reported basis.

NKE in the first quarter of FY 21 has reported the adjusted earnings per share of 95 cents, beating the analysts’ estimates for the adjusted earnings per share of 47 cents, according to analysts polled by Refinitiv. The company had reported 1 percent fall in the adjusted revenue to $10.59 billion in the second quarter of FY 21, beating the analysts’ estimates for revenue of $9.15 billion. Gross margin contracted 90 basis points in the first quarter compared to the prior year due to the impacts from COVID-19, including higher promotions to reduce excess inventory across the marketplace and higher supply chain costs.

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