Nike Inc. got a lift on Thursday afternoon after the company reported sales and earnings results that beat expectations.
For the third quarter, the athletic giant reported that revenues grew slightly over last year to $12.4 billion, ahead of the $12.28 billion expected by analysts surveyed by Yahoo Finance and ahead of prior guidance from the company. Net income was down 5 percent to $1.2 billion and diluted earnings per share was 77 cents, which included 21 cents per share of restructuring charges. This was ahead of the 74 cents expected by analysts.
The sales and earnings beat came after a challenging Q2 in December, when Nike announced new measures to “streamline” its organization to save up to $2 billion in costs over the next three years. These measures included layoffs, product simplification and increased automation. At the time, the Swoosh reported that North America revenues were down 3 percent in Q2, with wholesale sales in the region down 9 percent.
In recent months, market watchers have become increasingly skeptical of Nike’s progress within its “Consumer Direct Acceleration” (CDA) program it rolled out in June 2020, which involves zeroing in on DTC and digital channels and pulling out of some wholesale channels. Many have also criticized what they see as a lack of innovation from Nike.
“We are making the necessary adjustments to drive Nike’s next chapter of growth,” Nike president and chief executive officer John Donahoe said in a statement. “We’re encouraged by the progress we’ve seen, as we build a multiyear cycle of new innovation, sharpen our brand storytelling and work with our wholesale partners to elevate and grow the marketplace.”
In a call with analysts, Donahoe said Nike will emphasize four keys areas for growth moving forward: a renewed focus on sport, product innovation, bolder brand marketing and a deeper investment in wholesale.
Nike chief financial officer Matthew Friend also highlighted the company’s emphasis on innovation.
“Our teams are focused on what matters most to return to strong growth,” Friend said. “We are taking action to build a faster, more efficient Nike and maximize the impact of our new innovation cycle.”
By channel, Nike Direct revenues were slightly up in Q3 to $5.4 billion. Nike Brand Digital sales were down 3 percent on a reported basis and 4 percent on a currency-neutral basis. Wholesale revenues were up 3 percent to $6.6 billion.
Gross margin increased 150 basis points to 44.8 percent, driven by “strategic pricing actions and lower ocean freight and logistics costs, partially offset by higher product input costs and restructuring charges,” Nike said in a release.
Nike did not immediately provide an update on its full-year outlook. In Q2, the company said it expected Q4 revenue to be up in the low single digits and full year revenue to be up 1 percent compared to the prior year.
