Nike has the strength to "outperform peers" through a recession - UBS

(Alliance News) - Sportswear and shoe manufacturer Nike Inc reported a double-digit rise in second quarter revenue on Tuesday, impressing investors and analysts alike.

In the three months ended November 30, revenue rose 17% against the previous year, climbing to USD13.32 billion from USD11.36 billion as cost of sales jumped 24% to USD7.60 billion from USD6.14 billion.

Russ Mould at AJ Bell said the revenue growth - the best quarterly rise in a decade - was "testament to the brand's inherent strengths."

"To take an adage from the sporting world – form is temporary, class is permanent. Nike may have had a tough time, but it remains the dominant player in what is, with Adidas trailing a little behind, a duopoly in the sportswear and trainers market."

Nike reported net income of USD1.33 billion in the quarter, down 0.4% from USD1.34 billion the previous year. Basic earnings per share in the quarter, meanwhile, rose to USD0.85 from USD0.84.

Chief Financial Officer Matthew Friend said: "Consumer demand for Nike's portfolio of brands continues to drive strong business momentum in a dynamic environment. We remain focused on what we can control, and we are on track to deliver on our operational and financial goals - setting the foundation for sustainable, profitable growth."

interactive investor's Victoria Scholar said that Nike had "proven" the "sheer force" of its brand and the strength of its product line with the quarterly results, displaying it was "resilient" despite the "challenging macroeconomic headwinds that have plagued US retail this year."

Russ Mould agreed: "It may have had to ease up on pricing to clear some excess inventory but Nike’s ability to appeal across class and age demographics means wealthier clientele, less impacted by the cost-of-living crisis, have also helped to drive sales."

However, Mould acknowledged that there remained obstacles to clear in the short-term for Nike, particularly in the Chinese market, its third biggest for sales.

Nonetheless, Nike looks like it is stepping up to the plate according to Mould, with its continued shift towards selling more direct-to-consumer giving it "greater control over its own destiny."

UBS were confident in the athleisure brand. "We believe Nike has the brand strength, strategy, skills and resources to outperform peers through a recession," it said.

"Nike is a long-term outperformer in our view. Nike's investments in product innovation, supply chain speed, and digital are unlocking what is likely a multiyear period of above average growth."

As a result, the investment bank rated the firm at 'buy'.

Shares in Nike were up 12% at USD116.0p1 on Wednesday morning in New York. In the year-to-date, the stock is down 30%.

By Heather Rydings, Alliance News senior economics reporter

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