Nike Sprints Higher On Transformative Results The Nike (NYSE: NKE) growth story is one that seems to have no end. Over the past year, the company has doubled down on a transformation of its busine...
By Thomas Hughes •
This story originally appeared on MarketBeat
Nike Upped Its Game With Direct To Consumer
The Nike (NYSE: NKE) growth story is one that seems to have no end. Over the past year, the company has doubled down on a transformation of its business that includes a heavy focus on direct-to-consumer sales and e-commerce. The results of this transformation are mind-blowing, to say the least, and point to growth in fiscal 2022 and beyond.
"FY21 was a pivotal year for NIKE as we brought our Consumer Direct Acceleration strategy to life across the marketplace. Fueled by our momentum, we continue to invest in innovation and our digital leadership to set the foundation for NIKE's long-term growth." said John Donahoe, President & CEO.
Nike Isn't Playing In The Same League Anymore
To say that Nike had a transformative year is a bit of an understatement, especially for a company that is expected to bring in $50 billion in revenue over the next year. The company's Q4 results include a 95.6% increase in YOY revenue that beat the consensus by 1200 basis points. The company's $12.34 billion in revenue is up 19% sequentially and 20% over the past two years driven by strength in all channels. In North America, sales surged 141% versus last year and 29% over the past two years supported by a 54% increase in digital. Digital sales in the US are, notably, up 177% over the past two years. Sales in China were also strong but notably at 17%. In the EMEA segment, sales were up 124%.
Now, direct-to-consumer sales were up 73% across the network to $4.5. This represents 36% of sales and was driven by strong gains in the digital channels. Sales of Nike through digital channels are up 41% from last year and nearly 150% over the past two years.
"NIKE's brand momentum is a testament to our authentic consumer connections, digital strength and continued operational execution," said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. "As we advance our consumer-led digital transformation, we are building a new financial model that will continue to fuel long-term sustainable, profitable growth for NIKE."
Nike Is An Earnings Powerhouse
As amazing as the revenue gains are, the company's margins and earnings are even more impressive. The company was able to expand gross margins by 850 basis points and drive GAAP EPS to $0.93. This beats the consensus by $0.42 despite the company's exposure to rising freight costs, wages, and materials costs. This compares to a loss of $0.51 cents in the year-ago period and $0.62 cents 2 years ago. These margins include increased spending related to technology Investments that we see fueling growth long into the future.
Nike pays an ultra-safe dividend but one with a relatively low yield. The 0.8% yield is balanced out, however, by a 19-year history of dividend increases, A double-digit distribution CAGR, and a low 28% payout ratio compared to the analyst consensus estimates. Estimates that are apparently far too low.
The Technical Outlook: Nike Pole Vaults To New Highs
Shares of Nike are up more than 11% in the pre-market action and trading well above the previous day's close and the previous all-time high. Based on the game-changing results and the obvious shift in market sentiment we think the stock is going to go much higher. If we assume that forward earnings estimates are only half right the company's due for a major multiple expansion. In our view, the weekly charts are showing a $70 flag pole that puts price action near $200 based on today's impending breakout. 
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