Nike Stock Is Dashing Towards a Brighter Future

NKE's initiatives can further boost Nike stock

Nike (NYSE: NKE) reported record-high fiscal 2020 first-quarter earnings that easily surpassed analysts’ average estimates. Digital sales and its kids’ shoe business in particular boosted the company’s sales. Moreover, NKE has developed plans to grow further with the help of Nike Digital and top athletes who will promote its products. If you want to invest in Nike stock, here’s what you should know.

Nike Stock Climbs

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On Sept. 24, NKE reported fiscal first-quarter earnings of 86 cents per share, beating the Zacks Consensus Estimate of 71 cents per share. It also posted revenues of $10.66 billion, surpassing the Zacks Consensus Estimate of $9.95 billion. After the report, Nike’ stock jumped more than 5.5% in after-hours trading, according to CNBC. Today, in mid-afternoon trading, Nike stock is up 4%.

The company’s CEO, Mark Parker, credited digital sales, product innovations and back-to-school sales for the better-than-expected earnings. On the earnings call, he mentioned that online sales soared 42% in Q1, while a significant rise  in the sales of women’s shoes also boosted the company’s results.

Nike has traditionally sold shoes through retail stores worldwide, but in recent years, with its “Consumer Direct Offense” strategy, it has been trying to provide personalized products to consumers. Thanks to the success of this strategy, its digital sales grew 42%, as its flexible, fast and interactive cloud-based architecture has attracted more customers, making NKE’s digital offerings a big hit.

Moreover,August is the month when children go back to school for the new term, and NKE launched its first subscription service for kids in the quarter, Children’s sneakers seem to have fueled the overall shoe business, as NKE had the biggest back-to-school season in its history.

NKE also took a step toward making athletic apparel for women, and it earned four times higher revenues from sponsoring the Women’s World Cup this year compared to the previous year. Moreover, NKE has signed tennis champion Serena Williams to an endorsement deal. Both factors contributed positively towards the women’s shoe business, helping it rise by double-digit-percentage levels.

However, the highlight of this quarter’s earnings was the success of Nike’s Air Max React product line, specially the Air Max 270 that boosted its sneaker sales by triple-digit-percentage levels.

Nike’s solid results have certainly helped Nike stock gain traction. After all, NKE has outperformed the Shoes and Retail Apparel industry over the past three-month period (+5.6% vs 5.3%).

Is the Future Even Brighter for Nike Stock?

Nike’s future plans should also help the company surpass its own records. With its “plus-size” line, NKE will likely be able to attract athletes, and with its digital channel, it will offer consumers shoes that can be personalized to fit everyone’s size and taste.

Further, Nike’s Jordan line will have new designs that will attract athletes. For example, NBA rookie Zion Williamson will be playing the upcoming season wearing the Air Jordan 34, Nike’s signature Air Jordan basketball shoe. NKE will be working closely with Zion to develop the shoe for basketball. His input  should result in higher sales of the sneakers.

NKE is also trying to make changes to its sports apparel section, giving tough competition to Under Armour
(NYSE: UAA) and Lululemon (NASDAQ: LULU). What’s more, Nike stock has a Growth Score of A. The company’s expected earnings growth rate for the current year is 16.1% which is above the estimated 10% growth rate of the Zacks Shoe and Retail Industry industry.

NKE currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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