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2 key numbers show how quickly Nike is bouncing back from the pandemic

Daniel Roberts
·4 mins read

Nike reported its Q1 2021 earnings on Tuesday, and the report was so encouraging it sent competitors Lululemon and Under Armour up 3% after hours. By Tuesday morning, Nike was up 13% in premarket trading and sending the Dow 200 points higher.

Nike’s first-quarter revenue for the quarter encompassing June, July, and August came in at $10.59 billion, much better than the $9.11 billion expected, and earnings per share came in at 95 cents compared to 86 cents expected.

Although the $10.59 billion in sales was down 0.6% from a year earlier, Wall Street had expected Nike’s sales to be down 14.5% from a year earlier. The fact that sales are nearly back to where they were in summer 2019 shows that Nike (NKE) is close to emerging from the pandemic hit to its business. It also shows that contrary to what Under Armour (UAA) CEO Patrik Frisk told Yahoo Finance Live—that “everybody will be shrinking somewhat coming out of COVID”—Nike will not.

Two key numbers in particular underscore this.

BARCELONA, SPAIN - 2020/08/31: The new Nike advertising campaign is seen at a commercial premises under construction in Passeig de Gràcia. August ends with the largest number of commercial premises available at the center of Barcelona after decreasing commercial activity due to the Covid19 pandemic and the absence of tourism that has led many establishments to abandon the activity. (Photo by Paco Freire/SOPA Images/LightRocket via Getty Images)
The new Nike advertising campaign is seen at a commercial premises under construction in Passeig de Gràcia, in Barcelona, Spain. (Photo by Paco Freire/SOPA Images/LightRocket via Getty Images)

Digital sales rose 82% in the quarter

This tells most of the Nike story right now. In Q4, Nike’s digital sales were up 75%. Now in Q1 we see they’re still going higher, rising 82%. New Nike CEO John Donahoe, the former eBay CEO who took over for Mark Parker in January 2020 (tough timing), is rapidly executing a digital-first playbook focused around DTC (direct to consumer) and simplifying Nike’s product categories.

It’s working.

“Nike's transition to digital selling is happening much faster than we anticipated,” UBS analysts say in a note on Wednesday. “Importantly, we think this transformation is just getting started and will drive better-than-expected sales growth and margin expansion well into the out-years.”

Of course, all across the retail industry, big names like Walmart, Target, Best Buy, and Dick’s Sporting Goods have seen huge surges in e-commerce amid the pandemic. But Nike was focused on e-commerce before the pandemic, and has been able to further prioritize it during the pandemic.

China sales rose 6% in the quarter

Nike’s sales in North America haven’t clawed back to positive growth yet, with so many states still in some form of lockdown; North America sales declined 1.6%. But sales in China grew 6%, evidence that retail stores have reopened in China and consumers there are shopping again in stores or online.

China is a crucial global market for Nike, second in size only to America. In Q3 2020, in the thick of the pandemic, Nike’s sales fell in China for the first time in 20 quarters. Last quarter, in Q4, China sales were down 3%. Now in Q1, they are back to growth mode, up 6%. That should also be encouraging for Nike’s U.S. business, since John Donahoe said in March that the store closures in China were giving Nike “a playbook that we can use elsewhere... We’ve applied that playbook in Japan and South Korea over the past two months, and we’re seeing early momentum in those markets as well... With COVID-19 now spreading across Europe and the U.S., we are applying the same playbook.”

Now that Nike’s business in China is through the other side of the pandemic, it will no doubt look to apply those lessons to bring North America sales back next.

Daniel Roberts is an editor-at-large at Yahoo Finance and covers sports business. Follow him on Twitter at @readDanwrite.

Read more:

Under Armour CEO: ‘Everybody will be shrinking somewhat coming out of COVID’

3 signs Under Armour is ‘shrinking to grow’

Why Dick's Sporting Goods is wildly outperforming amid the pandemic

Walmart and Target huge e-commerce gains are a blaring siren to brick-and-mortar retail

Nike, Lululemon say they learned lessons from store closures in China they can apply in America

Companies like Nike and Dick’s are ‘finding their woke values’