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Category: Stock Market and Nike Inc
Date: 26 June 2020 Stock Price: $101.40 We take a look at the 4th quarter 2020 earnings report of Nike Inc. the sporting apparel and accessories group. How has the group been doing during the Covid-19 pandemic, with lockdowns and stay at home orders across the world limiting the opportunities for consumers to visit retail stores. Sales were down -38% compared to the same quarter of the previous year.
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- In a highly dynamic environment, the NIKE Brand continues to resonate strongly with consumers all over the world as our digital business accelerates in every market -John Donahoe, President and Chief Executive Officer "
About Nike Inc.
NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiary brands include Converse, which designs, markets and distributes athletic lifestyle footwear, apparel and accessories; and Hurley, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories
Overview of Nike's 4th quarter 2020 earnings report
Data below refers to the latest quarter unless specified otherwise:
Nike Brand Revenues per product category:
- Revenues $6.313 billion (down -38% from $10.184 billion for the same quarter of the previous year)
- Cost of sales: $3.960 billion (down -29% from $5.551 billion for the same quarter of the previous year)
- Gross profit: $2.353 billion (down -49% from $4.633 billion for the same quarter of the previous year)
- Net loss: -$790 million (down from $898 million for the same quarter of the previous year)
- Diluted loss per share: -$0.51 (up from $ 0.62 for the same quarter of the previous year)
- PE ratio of Nike Inc: 63.1
- Diluted number of shares outstanding: 1.555 billion (down from 1.607 billion for the same quarter of the previous year)
- Dividends declared per common share: $ 0.245 (up 10% from $ 0.20 for the same quarter of the previous year)
- Dividend yield of Nike: 0.98%
- Cash and equivalents: $8.348 billion
- Cash and equivalents per share: $5.36
- Cash and equivalents makes up 5.2% of Nike Inc's market capital
- Cash and equivalents makes up 26.6% of Nike Inc's total assets
- Accounts receivable: $2.749 billion
- Accounts receivable (money owed to the group) makes up 8.8% of Nike Ic's total assets
- Inventories: $7.367 billion
- Inventories makes up 23.5% of Nike Inc's total assets
- Shareholders’ equity in Nike Inc: $8.055 billion
- Shareholders equity per share: $5.18
- Nike Inc is trading at 19.5times its stockholders equity. This is well outside the expected range of between 2 and 4 times what most companies tend to trade at
- The average price to book ratio of firms in the S&P 500 is 3.7
Nike Brand Revenues per product category:
- Footwear $ 4.201 billion (down -35% from the same quarter of previous year)
- Apparel $1.640 billion (down -42% from the same quarter of previous year)
- Equipment: $165 million (down -53% from the same quarter of previous year)
- Total: $6.012 billion (down -38% from the same quarter of previous year)
Nike's management commentary on their 4th quarter 2020 earnings
BEAVERTON, Ore., June 25, 2020 - NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2020 fourth quarter and full year ended May 31, 2020.
Our fourth quarter results were significantly impacted by physical store closures across North America, EMEA and APLA, where 90 percent of NIKE-owned stores were closed for roughly eight weeks in the quarter to protect the health and safety of teammates and consumers and help slow the spread of the COVID-19 pandemic. Our wholesale partners largely followed the same pattern and as a result, product shipments to wholesale customers were down nearly 50 percent resulting in lower total revenue and higher inventory. During the widespread physical store closures, we accelerated our connection and engagement with our consumers leveraging the strength of our digital ecosystem.
“In a highly dynamic environment, the NIKE Brand continues to resonate strongly with consumers all over the world as our digital business accelerates in every market,” said John Donahoe, President and Chief Executive Officer, NIKE, Inc. “We are uniquely positioned to grow, and now is the time to build on NIKE's strengths and distinct capabilities. We are continuing to invest in our biggest opportunities, including a more connected digital marketplace, to extend our leadership and fuel long-term growth.”
Our fourth quarter results were significantly impacted by physical store closures across North America, EMEA and APLA, where 90 percent of NIKE-owned stores were closed for roughly eight weeks in the quarter to protect the health and safety of teammates and consumers and help slow the spread of the COVID-19 pandemic. Our wholesale partners largely followed the same pattern and as a result, product shipments to wholesale customers were down nearly 50 percent resulting in lower total revenue and higher inventory. During the widespread physical store closures, we accelerated our connection and engagement with our consumers leveraging the strength of our digital ecosystem.
“In a highly dynamic environment, the NIKE Brand continues to resonate strongly with consumers all over the world as our digital business accelerates in every market,” said John Donahoe, President and Chief Executive Officer, NIKE, Inc. “We are uniquely positioned to grow, and now is the time to build on NIKE's strengths and distinct capabilities. We are continuing to invest in our biggest opportunities, including a more connected digital marketplace, to extend our leadership and fuel long-term growth.”
COVID-19 Update on Operations
As of today, approximately 90 percent of NIKE-owned stores are open across the globe. Retail traffic continues to improve week-over-week with higher conversion rates as compared to the prior year. In Greater China, nearly 100 percent of NIKE-owned stores are open. In North America, EMEA and APLA, approximately 90 percent of physical owned stores were closed during the fourth quarter with stores gradually reopening at different paces in each country beginning in mid-May. Today, roughly 85 percent of NIKE-owned stores are open in North America and about 90 percent in EMEA, with approximately 65 percent open in APLA or operating under reduced hours.
“As physical retail re-opens, NIKE's strong digital trends continue, a testament to the strength of our brand and the investments we've made to elevate digital consumer experiences,” said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. “Amid macroeconomic uncertainty, we will continue to operate with agility, focused on optimizing marketplace supply and demand, cost management and leveraging our financial strength to drive long-term sustainable, profitable growth.” As we continue to reopen retail stores and increase distribution center activity, we remain focused on prioritizing the health of our teammates and consumers and have taken proactive steps to help ensure a safe environment. During the quarter, we made significant investments to provide employee pay continuity and committed over $25 million to support communities impacted by COVID-19 among other COVID-19 response efforts.
As of today, approximately 90 percent of NIKE-owned stores are open across the globe. Retail traffic continues to improve week-over-week with higher conversion rates as compared to the prior year. In Greater China, nearly 100 percent of NIKE-owned stores are open. In North America, EMEA and APLA, approximately 90 percent of physical owned stores were closed during the fourth quarter with stores gradually reopening at different paces in each country beginning in mid-May. Today, roughly 85 percent of NIKE-owned stores are open in North America and about 90 percent in EMEA, with approximately 65 percent open in APLA or operating under reduced hours.
“As physical retail re-opens, NIKE's strong digital trends continue, a testament to the strength of our brand and the investments we've made to elevate digital consumer experiences,” said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. “Amid macroeconomic uncertainty, we will continue to operate with agility, focused on optimizing marketplace supply and demand, cost management and leveraging our financial strength to drive long-term sustainable, profitable growth.” As we continue to reopen retail stores and increase distribution center activity, we remain focused on prioritizing the health of our teammates and consumers and have taken proactive steps to help ensure a safe environment. During the quarter, we made significant investments to provide employee pay continuity and committed over $25 million to support communities impacted by COVID-19 among other COVID-19 response efforts.
Nike Inc (NYSE: NKE) stock price history
The image below, obtained from Google, shows the stock price history of Nike Inc (NYSE: NKE) for the last 5 years. And its been a very good time for Nike Inc stockholders. 5 years ago it was trading at $55 and its currently trading at around $101.4 a stock. That's a strong return of 84.5% over the last 5 years.
The stock of Nike is trading at close to its 52 week high of $105.62 and far away from its 52 week low of $60, which to us is an indication that the short term sentiment towards the stock of Nike Inc is very positive at this point in time.
The stock of Nike is trading at close to its 52 week high of $105.62 and far away from its 52 week low of $60, which to us is an indication that the short term sentiment towards the stock of Nike Inc is very positive at this point in time.
Recent coverage of Nike Inc
The extract below covers the latest earnings report from Nike as obtained from Investors.com
Nike (NKE) posted an unexpected loss for the fiscal fourth quarter, but management was upbeat on e-commerce sales trends and digital engagement with customers. Nike stock fell late.
Management On Nike Earnings Call
CEO John Donahoe told analysts that the coronavirus pandemic has accelerated the pace of digital adoption, even as physical stores reopen. He noted that Nike Training Club weekly active users were up triple digits in the quarter, including 25 million workouts with women alone. Directly engaging with consumers through activity apps is the core of Nike's strategy as it leads to increased purchasing through consumer apps, he said.
Nike will reach its digital penetration goals more than two years ahead of schedule, Donahoe added, predicting 50% penetration. CFO Matt Friend said Nike digital growth accelerated in each month of the quarter, even as stores reopened, and the trend is continuing. Digital could make up 50% of sales in foreseeable future, up from nearly 30% in Q4, he said. Greater China and South Korea returned to growth in Q4, while the U.S. is still in the recovery period, he added and expects China will return to full health at the end of June.
Read the full article here
Nike (NKE) posted an unexpected loss for the fiscal fourth quarter, but management was upbeat on e-commerce sales trends and digital engagement with customers. Nike stock fell late.
Management On Nike Earnings Call
CEO John Donahoe told analysts that the coronavirus pandemic has accelerated the pace of digital adoption, even as physical stores reopen. He noted that Nike Training Club weekly active users were up triple digits in the quarter, including 25 million workouts with women alone. Directly engaging with consumers through activity apps is the core of Nike's strategy as it leads to increased purchasing through consumer apps, he said.
Nike will reach its digital penetration goals more than two years ahead of schedule, Donahoe added, predicting 50% penetration. CFO Matt Friend said Nike digital growth accelerated in each month of the quarter, even as stores reopened, and the trend is continuing. Digital could make up 50% of sales in foreseeable future, up from nearly 30% in Q4, he said. Greater China and South Korea returned to growth in Q4, while the U.S. is still in the recovery period, he added and expects China will return to full health at the end of June.
Read the full article here
Nike Inc's (NYSE: NKE) stock valuation
So what do we value one of the worlds biggest clothing and apparel brands stock at following their 4th quarter 2020 earnings report? Based on Nike's latest earnings report for the 4th quarter of their 2020 fiscal year what is our target price (full value price) of Nike Inc. stock?
Based on their latest earnings report our valuation models provides a target price (full value price) for Nike Inc at $58.40 a stock. We therefore believe Nike Inc stock is currently overvalued and we would not recommend long term fundamental and value investors buy into the stock at its current price. We usually suggest looking to buy at least 10% below our target price which in this case is $58.40. We therefore believe a good entry point into the stock of Nike Inc stock is at $52.60 or below.
We expect the stock of Nike to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months. And while the sell off sparked by Coronavirus fears has seen the stock of Nike pull back strongly, we believe the stock has some significant downside risk to it.
Based on their latest earnings report our valuation models provides a target price (full value price) for Nike Inc at $58.40 a stock. We therefore believe Nike Inc stock is currently overvalued and we would not recommend long term fundamental and value investors buy into the stock at its current price. We usually suggest looking to buy at least 10% below our target price which in this case is $58.40. We therefore believe a good entry point into the stock of Nike Inc stock is at $52.60 or below.
We expect the stock of Nike to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months. And while the sell off sparked by Coronavirus fears has seen the stock of Nike pull back strongly, we believe the stock has some significant downside risk to it.
Next earnings release of Nike Inc
It is expected that Nike Inc will release their 1st quarter 2021 earnings report in middle of September 2020