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Nike Gains as U.S. Growth Cushions China Setback -Breaking

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© Reuters.

By Dhirendra Tripathi

Investing.com – Nike stock (NYSE:) traded 3.7% higher in Tuesday’s premarket as reopening in U.S. got people to buy more of its shoes and apparel in the three months through November.

Sales in North America, Nike’s largest market, rose 12% year-on-year, offsetting a 20% slump in the company’s sales in China. A jump in direct sales also helped the company overcome reverses in the world’s second-largest economy, growing 9% to $4.7 billion.  

Sales in China suffered as its suppliers’ factories in Vietnam, a key manufacturing base, were shut for long periods due to the pandemic.  

The company informed analysts on a conference phone that the closure of factories in Vietnam led to it cancelling production of about 130 million units. Nike claimed that the factories have all been operational, and Nike reported that weekly apparel and footwear production is now at 80%.

Strong online sales, robust demand and supply chain problems all helped Nike reduce the need to discount, which allowed it to grow its margins. The gross margin grew by 2.8 percent to nearly 46%.

Revenue rose by 1% to $11.4 million in the second quarter. An adjusted profit per share of 83 cents rose 6 percent to beat expectations.

Nike reiterated its expectation of a 5% increase in sales for the year to May, even though there are ongoing disruptions to supply chains due Vietnam factory closings. This will impact current quarter sales. In the fiscal third quarter, sales will grow less than 5% and margins are set to decline by 1.5 percentage points.

 

 

 

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