(Bloomberg) -- Nike Inc. climbed on Wednesday as the sneaker maker’s better-than-expected, digitally-driven third-quarter sales and performance in China, and commentary on what it learned there and in Japan and South Korea position the company to emerge even stronger after the Covid-19 crisis, analysts said.The fact that Nike’s China revenue declined only 4% year-over-year in the quarter is “quite frankly incredible and speaks to the brand’s ability to manage through macro dislocation,” wrote Cowen analyst John Kernan.By driving a “strong digital marketing campaign,” Nike e-commerce “remains open and in growth mode,” Chief Executive Officer John Donahoe said on the Tuesday evening conference call. In China, “at a time when people were confined to their homes, we moved swiftly to leverage our digital app ecosystem and Nike expert trainer network.” This resulted in an “extraordinary rise” in sign ups and engagement for Nike Training Club workouts in China, and weekly active users for all of its Nike activity apps were up 80% by the end of the quarter versus the beginning of the quarter.
China sales for the fourth-quarter are expected to be “flat” and should “return to growth in fiscal 2021, said finance chief Andy Campion, adding that the company will apply its same China “playbook” in regions around the world.
Investors rewarded Nike for its better-than-feared performance in the third-quarter and its ability to navigate through the global economic disruption. Shares rose as much as 13% before the stock market opened Wednesday.Insert chart
Here’s more of what analysts had to say after the results.
Susquehanna, Sam Poser
Third-quarter results highlight Nike’s “agility,” with the coronavirus impact in China less severe than expected as business in the region has begun to normalize.
“Nike’s digital prowess and ability to manage through the virus in China is likely a good proxy for how the recovery will take shape in North America and EMEA.”
Digital sales in both EMEA and North America are “robust” and will partially offset the lack of brick-and-mortar business for the duration of the Covid-19 crisis.
“Brand strength, digital prowess, and a fortress balance sheet position the company to emerge from this crisis even stronger than before it went in.”
Rates positive, price target $100.
Consumer Edge Research, Carson Barnes
“Nike Direct E-commerce was a bright spot, growing 30%+ in China and 36% overall with Covid-19 accelerating customer’s digital engagement. Sales are quickly recovering in China, with nearly 80% of the stores now open across the country.”
No doubt that the fiscal fourth quarter will be tough for Nike as it faces the brunt of the impact from Covid-19. Carson expects to see sales declines “in nearly every region.” But China, Japan and Asia seem to be “rapidly recovering” and Nike is using the crisis to press its digital advantage.
Rates overweight, price target $105 from $110.
Telsey Advisory Group, Cristina Fernandez
Third-quarter sales in China declined 4%, much better than Telsey’s projection for a 20% drop. It is encouraging that Nike’s sales held up “better than feared during an unprecedented challenging time,” Fernandez wrote.
In North America, while stores have been closed since March 16, digital growth has been very strong in the past week, up nearly 100% vs up ~30% in the third quarter.
“There remains a lot of uncertainty in the near-term as North America and Europe are still in the middle of the containment phase.”
That said, as trends normalize in fiscal 2021, Nike should emerge a winner in the retail landscape with the ability to “drive sales growth and gross margin improvement through product innovation, inventory management, more direct customer engagement and elevated experiences digitally and in stores.”
Rates outperform, price target to $95 from $90.
Deutsche Bank, Paul Trussell
“Facing a global crisis, management outlined its ‘playbook’ that included shifting launches and some fulfillment centers to digital only, emphasizing at home fitness in its marketing including making its premium app service free to consumers, postponing SG&A expenses (especially spend associated with sporting events) and opening stores back up on a market-by-market basis.”
China is impressively expected to have relatively flattish revenue growth in 4Q, after an implied drop of ~50% in February, driven by digital growth approaching triple digits (including T-Mall).
Notably, digital growth has been similarly robust in recent days in North America.
Rates hold, price target to $84 from $80.
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