Nike's latest financial results blew past Wall Street expectations, thanks to stepped-up direct-to-consumer efforts and more efficient marketing.
For the first quarter, the Beaverton, Oregon-based company says revenue came in at $10.6 billion, roughly flat with where it was a year ago -- a much stronger result than many anticipated. Direct sales rose 12% to $3.7 billion. Digital sales continued to soar, up 82%.
Net income climbed 11% to $1.5 billion, benefiting from a 33% decline in demand-creation costs. Nike decreased marketing spending even as live sporting events resumed, "creating fewer but significantly more impactful brand campaigns," company execs said in a conference call for investors transcribed by The Motley Fool.
Execs also said Nike increased return on performance marketing investment, with accelerated digital demand and greater digital engagement. "The Nike and Jordan brands are stronger than ever, delivering historic records of engagement through nearly 5 billion social media impressions."
With almost all its stores reopened, the company says it continues to experience year-over-year declines in foot traffic.
"Nike is a best-in-class consumer brand with an innovative product pipeline in running, basketball, yoga, and sportswear for men and women," writes Paul Trussell, an analyst who covers Nike for Deutsche Bank, upgrading Nike to a "Buy" recommendation.
He credits the company robust digital and direct sales growth for the healthy numbers. Nike is also making "market share gains across all geographies while also benefiting from an expanding pie through increased consumer focus on health, exercise, sports and dressing casually."
Trussell says that puts Nike on a very short list among battered sport, apparel and retail brands: "Nike is a better, more profitable company today than it was a year ago."
Christopher Svezia, who follows Nike for Wedbush, is also impressed with the company's better-than-expected revenues, roughly $1 billion better than his forecast and $1.5 billion ahead of Wall Street consensus.
Nike's bounceback came a quarter earlier than expected, with continued strong demand for Nike and Jordan merchandise.
As the company heads toward its new fiscal year, Svezia anticipates that "the roll-out of 200 Nike Live style stores should also not only help drive digital growth," but also accelerate opportunities in women's apparel, which still accounts for less than 25% of sales.