Analyst Note
| David Swartz |Wide-moat Nike surpassed our sales and earnings expectations in its May-ending fiscal 2021 fourth quarter, as ongoing strength in the athletic category was boosted even more by pent-up demand and government stimulus. Against easy comparisons, Nike crushed our 95% sales growth estimates for both North America (141%) and Europe, the Middle East, and Africa (124%). Meanwhile, as had been presaged by Tmall sales numbers, Nike’s momentum in greater China was stalled by the consumer boycott, as its sales growth of 17% in the region missed our 42% estimate. However, the firm reported improving results in China in May and June, and we expect the impact will be transitory even if the forced labor controversy is not resolved. Overall, Nike’s sales outperformance and unusually low marketing expense drove quarterly gross and operating margins of 45.8% and 15.5%, respectively, that beat our 44% and 10% estimates.