Nike, Inc is the world’s leading company in the footwear manufacturing space. NKE’s portfolio of brands includes the NIKE Brand, Jordan Brand, Hurley, and Converse.
The coronavirus pandemic has led to the closure of many of the physical retail stores of footwear manufacturers. However, as sports events are gradually resuming, we think it is wise to invest in Nike, which has a significant digital presence. Nike has already proved it can generate significant digital sales and is benefiting from the rising demand from China.
Nike has returned 126.4% over the past five years. In terms of the past nine months’ performance, Nike is a clear winner with 79.1% returns versus Skechers.
On December 30, Nike announced the launch of its Chinese New Year 2021 collection. The collection is organized into three design themes — the explosive firecracker, the artisanal Chinese knot. and the naturalistic spring blossom. The Nike Dunk is set to be launched on January 22 on SNKRS, the Jordan Brand footwear, including the Air Jordan V Low, is expected to be released on January 14, and the Air Jordan I Low OG is set to be released on January 31. The CNY colorways of the Converse Chuck 70 are expected to be offered beginning January 21.
The company launched the Nike React Infinity Run 2 on December 30. It features an updated Flyknit upper to help promote more strength and support in the toe area, eye-stay, and foxing, and with more breathability in areas like the vamp and midfoot. UCLA Athletics announced a six-year agreement with the company on December 8 to make Nike and Jordan Brand the Bruins’ official athletic footwear, apparel, and equipment provider beginning July 1, 2021.
Recent Financial Results:
Nike’s revenue has surged 8.9% year-over-year to $11.2 billion for the third quarter ended November 30, 2020. The revenue growth was driven by growth across all geographies and led by 24% year-over-year growth in the China segment.
Nike’s gross profit has increased by 6.7% year-over-year to $4.8 billion, yielding a gross margin of 43.1%. Its direct sales increased by 32% year-over-year, and brand digital sales increased by 84% year-over-year. Net income increased by 12.2% year-over-year to $1.3 billion. And its EPS increased by 11.4% year-over-year to $0.78.
Past and Expected Financial Performance:
Nike’s revenue has grown at a CAGR of 3.3% over the past three years. Analysts expect the company’s revenue to increase by 9.1% for the quarter ending February 28, 2021, and 15.6% in 2021. Nike’s EPS is expected to grow 41.5% for the quarter ending February 28, 2021, and 88.8% in 2021. Moreover, its EPS is expected to grow at a rate of 34.3% per annum over the next five years.
Nike’s trailing-12-month revenue of $38.25 billion. However, the gross margin of Nike’s 42.9%.
Nike’s ROE and ROA of 28.3% and 7.5%, respectively.
Nike Long (Buy)
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