Nike Inc. reported results for the second quarter of 2022 that beat analysts’ expectations, despite ongoing challenges from the supply chain crisis.
The athletic giant on Monday reported revenues of $11.4 billion for Q2, up 1% year over year and flat on a currency-neutral basis. This beat estimates of $11.25 billion in revenues from a Yahoo survey of analysts. Net income was $1.3 billion, up 7% year over year. Diluted earnings per share was $0.83, which also beat analysts’ predictions.
Digital sales for the brand grew 12% in Q2, led by a 40% growth in sales in North America. That region also saw $4.48 billion in revenue overall in Q2. Sales at Nike owned stores were up 4%.
Shares of Nike were up at least 3% in extended trading on Monday.
While revenues only grew slightly year over year, the beat comes amid an ongoing supply chain crisis that has pummeled the footwear and apparel industry. For Nike, this has impacted multiple regions and has included months-long factory closures throughout the summer and beyond. Nike had two months of no unit production in Vietnam when two of its footwear suppliers there stopped manufacturing in July. The halt in production continues to impact inventory and sales in regions like Greater China.
“We are now in a much stronger competitive position today than we were 18 months ago,” he said. “And I want to thank our roughly 75,000 global teammates for all their work to provide consumers with the compelling new product, innovation and experiences that only Nike can deliver.”
Prior to the earnings announcement, analysts expressed confidence in the Swoosh’s ability to regain the momentum it lost over the summer.
“The global health of, and demand for, the Nike brand remains at historically high levels,” wrote Williams Trading analyst Sam Poser in a note last week in which he gave Nike a “Buy” rating. In his analysis, Poser said that supply chain disruptions had not stopped Nike from delivering product at better than anticipated rates and that the brand’s shift towards DTC channels has helped improve its business overall. Similarly, Cowen analyst John Kernan said in his earnings preview for Nike that “factory closures in Vietnam did not persist as long as feared.”
Despite recent difficulties, Nike had some major wins in recent months. Last week, Nike acquired RTFKT, a digital creator of virtual sneakers, collectibles and accessories, in a bid to expand its influence in the metaverse. Stifel analysts said the acquisition has “strategic value” to help “expedite the expansion into Nike’s potential NFT offerings.”
Perhaps most striking, Nike has doubled down even further on its DTC strategy, a move that is already proving successful in terms of sales. In 2022, partnerships with certain retailers such as DSW will end, which means that more product will be directed through Nike’s own stores and websites. For these reasons and more, analysts and experts continue to refer to Nike as a market leader, despite recent headwinds.