Nike shares rise as earnings top estimates on strong North America demand

Nike on Monday reported earnings and sales for the fiscal third quarter that topped analysts’ estimates, thanks to robust demand in North America as consumers headed back to stores.

The better-than-expected results proved Nike’s ability to operate in a volatile environment, CEO John Donahoe said in a press release. “Marketplace demand continues to significantly exceed available inventory supply,” he added.

Shares rose more than 6% in after-hours trading.

Here’s how Nike did in its fiscal third quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

• Earnings per share: 87 cents vs. 71 cents expected
• Revenue: $10.87 billion vs. $10.59 billion expected

Nike reported net income for the three-month period ended Feb. 28 of $1.4 billion, or 87 cents per share, compared with $1.45 billion, or 90 cents a share, a year earlier. That topped profit estimates for 71 cents a share, according to Refinitiv data.

Sales rose 5% to $10.87 billion from $10.36 billion a year earlier, beating analysts’ expectations for $10.59 billion.

Nike said sales in its biggest market, North America, climbed 9%. Sales in Greater China, the company’s third-biggest market behind its Europe, Middle East and Africa segment, fell 5% from the prior year.

As of Feb. 28, Nike said inventories on its balance sheet totaled $7.7 billion, up 15% from the prior-year period, in part due to ongoing supply chain disruptions that have elongated transit times, the company said. The bloated inventory levels were partially offset by robust consumer demand, it said.

Nike’s gross margins increased slightly to 46.6% from 45.6% the prior year, thanks to more full-price selling.

Nike has increasingly shifted its business away from wholesalers and instead to selling more goods directly to consumers. Foot Locker, for example, recently said it would lose a percentage of Nike merchandise in the coming years. In turn, Nike has been investing heavily in its website and flagship stores to win sales.

Wholesale revenue in the third quarter fell 1%, while Nike’s store sales rose 14% year over year, as shopper traffic “normalized,” the company said.

As of Monday’s market close, Nike shares are down 22% this year.

Find the full earnings press release from Nike here.

This story is developing. Please check back for updates.