Why Nike Inc (NYSE: NKE) stock is going gangbusters today

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Nike Inc (NYSE: NKE) stock rose over 7.7% on 25th March, 2020 (as of 9:36 am GMT-4; Source: Google finance) (Source: Google finance) after the company posted better than expected results for the third quarter of FY 20. Nike has reported earnings of $847 million, in the quarter, compared to $1.1 billion, in the year-ago quarter as strong revenue growth in NIKE Direct and across EMEA, APLA and North America was offset mainly due to the aforementioned non-recurring charge and the impacts to Greater China from COVID-19. Nike’s inventories were up 7% to $5.8 billion compared to the prior-year period, driven by anticipated strong demand across all geographies along with higher inventories in Greater China due to COVID-19. The company’s cash and short-term investments stood at around $3.2 billion, which is $864 million lower than last year as share repurchases, dividends, and investments in infrastructure more than offset proceeds from net income.

Meanwhile, the company in one month had gradually reopened its stores in China, which got closed due to COVID-19. The people got back to work and retail traffic had begun improvement significantly. Today, nearly 80% of the company’s stores in China have reopened with more coming back online every day.

NKE in the third quarter of FY 20 has reported the adjusted earnings per share of 53 cents, beating the analysts’ estimates for the adjusted earnings per share of 51 cents, according to Analysts polled by FactSet. The company had reported the adjusted revenue growth of 5 percent to $10.1 billion in the third quarter of FY 20, beating the analysts’ estimates for revenue of $9.8 billion. This is driven by a 13% growth in Nike Direct, with digital growth of 36% and strong growth across Nike’s several markets, including North America, which offset the impact of COVID-19 in Nike’s business in China. Gross margin contracted by 80 basis points in the third quarter as higher average selling prices and better off-price margin were offset by the impact of COVID-19 mainly in Greater China as the company managed inventory sell-through in that market.

Additionally, during the third quarter of 2020, NKE had repurchased 9.6 million shares for approximately $957 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of February 29, 2020, the company had repurchased a total of 43.3 million shares under this program for approximately $3.9 billion.

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