Lame Start of Financial Year: Quarterly Report Drags Nike Shares Down
The aftermath of the COVID-19 pandemic are still haunting businesses that fail to return to their previous production volumes. Hence, we keep seeing sad financial performance and no less sad forecasts for the nearest future. And this is not only the case of small and medium enterprises – huge transnational giants, such as the American Nike, also suffer.
At the end of last week, the sportswear brand reported its performance in Q1, financial 2022. The market reaction to the results of June-August, 2021 was unsupportive, to put it mildly. Let’s discuss the reasons for and the scale of what’s happened. Are you in?
Quarterly report of Nike: revenue grows but remains disappointing
The statistics of Nike for the previous quarter is hard to call weak: compared to the results of the 2020, crucial values have grown. However, Wall Street experts had been more optimistic. Anyway, the issue of Asian supplies is graver than they had supposed. We’ll ponder on this later.
All in all, if you compare the results of last summer and the financial performance of this summer, you will definitely see growth of revenue. Yet is you compare to subsequent quarters, the growth of specifically this index will not be as prominent. Also, Nike has let investors now that the results of the next quarter might be even more disappointing.
Important report details
|Q3 (June-August), 2021 revenue||Forecast||Q3 (June-August),2020||Q2 (March-May), 2021||Comparison to Q3, 2020||Comparison to Q2, 2021|
|Revenue||$12.25 billion||$12.46 billion||$10.59 billion||$12.34 billion||+16%||-0.73%|
|Return on stock||$1.15||$1.11||$0.95||$0.93||+22%||+24%|
|Net profit||$1.87 billion||.||$1.52 billion||$1.51 billion||+23%||+24%|
Reaction of Nike shares
Te quarterly report of the world’s largest sportswear manufacturer saw light on September 23rd. The financial performance of the previous quarter didn’t have time to influence the quotations significantly, so trades closed with growth of Nike (NYSE: NKE) shares by 1.36% to $159.58.
However, the next trading session was in quite a different key: on September 24th, Nike shares dropped by 6.26% to $149.59. The low of the day was $148.
As you remember, since the beginning of 2021, the shares had grown by 5.7% and by 20.4% - over the last 12 months. The high of this time happened on August 5th when the share price reached $173.85. However, almost right after that, talks started around some problems with supplies from Asia, and the quotations headed down.
What are those problems about?
The corporation informed investors that due to the COVID-19 pandemic in Vietnam, where almost 50% of shoes and 30% of all clothes of the brand are manufactured, there would be serious problems in the production process. Firstly, plants’ work is unstable; secondly, there’s a shortage of employees.
All this impedes supplies from Asia to North America, increasing the supply terms up to 80 days. The company forecasts that logistics and production will stabilize no earlier than the end of 2022.
On September 23d, Nike reported its financial performance for Q1, financial 2022. Revenue grew, compared to June-August, 2020, but the growth remained inferior to the expectations of Wall Street analysts.
Moreover, experts note that, compared to the previous reporting period, income dropped by almost 1%. This means that supply troubles from Asia affect the corporation more than expected. Thank you, COVID-19!