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Nike Inc Class B NKE

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Wide-Moat Nike Closed Fiscal 2021 Strong and Provided Aggressive Long-Term Goals; Shares Expensive

David Swartz Equity Analyst

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.

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Company Profile

Business Description

Nike is the largest athletic footwear and apparel brand in the world. It designs, develops, and markets athletic apparel, footwear, equipment, and accessories in six major categories: running, basketball, soccer, training, sportswear, and Jordan. Footwear generates about two thirds of its sales. Nike’s brands include Nike, Jordan, and Converse (casual footwear). Nike sells products worldwide and outsources its production to more than 300 factories in more than 30 countries. Nike was founded in 1964 and is based in Beaverton, Oregon.

Contact
One Bowerman Drive
Beaverton, OR, 97005-6453
T +1 503 671-6453
Sector Consumer Cyclical
Industry Footwear & Accessories
Most Recent Earnings May 31, 2021
Fiscal Year End May 31, 2022
Stock Type Cyclical
Employees 73,300

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