Nike To Hit Record High After Impressive Results

Nike is soaring 13% pre-market after stellar Q1 results

Charts (4)

Nike surged 3% late in the previous session and is trading up a further 13% in pre-trading today pushing the company to a fresh record high.
Investors can’t get enough of Nike after it reported impressive Q1 results.

Clothes retailers, in general, particularly those with bricks and mortar have performed badly across the coronavirus pandemic. However, sports wear is one area that has outperformed and within that sector, Nike is shining brightly.

• EPS $0.95 vs $0.47 exp.
• Revenue $10.59 billion vs $9.15 billion exp.

The results show that Nike has rebounded firmly after experiencing a big slump last quarter with gains in China and digital sales offsetting weak US numbers. Back in June Nike reported an unexpected Q4 loss and a 38% decline in revenue year over year owing to the temporary closures of its stores. 
This quarter sales in China have risen 6% as stores reopen and consumer confidence rises. Meanwhile sales in the US are down 2% owning to the lockdown restrictions which temporarily closed stores and kept customers away.

Nike has reported that its stores are almost all open. Footfall is down from a year ago, but those that enter the store come with the intention of buying. As a result, conversion rates are up.

Online sales surge
Bricks and mortar aside Nike revealed an 82% increase in online sales. Nike has used the coronavirus pandemic as an opportunity to accelerate its digital business. Nike has grasped the fact that digital has become the new norm. The firm has been investing heavily in its website and mobile app, with digital sales now making up at least 30% of total quarterly sales, a target that Nike had initially aimed to achieve in 2023.
With working from home the new norm, consumers are looking for comfortable clothing which is boosting demand for athleisure and trend which had started to pick up even before lockdown. An increase in people trying at home workouts is adding to the momentum. 

Not alone
Nike is not alone in its upbeat results, with other athletic focused brands such as Lululemon and Peloton also reporting strong results in recent weeks. Whilst Nike is expected to take another step higher when Wall Street opens, European sporting brands are also enjoying a strong performance as the upbeat mood spills over. Adidas trades +6% and Puma +5%.

Chart thoughts
Nike is set to open 13% higher to a fresh record high of $131.35. The stock trades firmly above its ascending trendline, 50, 100 and 200 day sma a bullish chart. However, the jump higher on the open could push the RSI into overbought territory, so a pull back could be on the cards
Immediate support could be seen 120.65 last week’s all time high.

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