December 24, 2021 8:00 AM
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3
 min

Strong reporting despite falling sales in China

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Nike posted better-than-expected earnings and revenues for the second quarter of fiscal 2022 ended November 30, despite a sharp decline in sales in China. Nike's quarterly revenues increased 1% yoy to $ 11.36 billion, better than the market forecast of $ 11.25 billion. Excluding currency fluctuations, the figure was flat on an annualized basis. Online sales of the company for the reporting period increased by 12% year-on-year.

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Nike's revenues in China (including Hong Kong, Macau and Taiwan) fell 20% yoy to $ 1.84 billion (minus 24% yoy excluding currency changes). Sales in North America increased 12% year-on-year to $ 4.48 billion. Revenue in the Europe, Middle East and Africa region rose 6% to $ 3.14 billion, and in Asia-Pacific and Latin America decreased by 8 %, to $ 1.35 billion. Net income for the quarter rose to $ 1.34 billion, or $ 0.83 per share, up from $ 1.25 billion, or $ 0.78 per share, in the same period a year earlier, which largely outperformed market consensus at $ 0.66.

The company's management expects that in the current fiscal year, which began in June, revenue will increase by more than 10% and exceed $ 50 billion. Nike continues to strengthen its brand by expanding its product line (Jordan, Flyknit, Air, React) and improving the efficiency of its digital sales channels. We project the company's market capitalization to reach $ 300 billion and earnings per share to rise to $ 7 per share. Taking into account the possibility of generating an average annual free cash flow of $ 6 billion over 2022-2025, Nike will be able to return about $ 26 billion to shareholders over the next five years through share buybacks from the market and payment of dividends.

Nike, with annual revenue of $44.5 billion in FY21, is the global leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities.

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