Nike posts huge Q3 earnings beat, stock surges

Yahoo Finance Live breaks down Nike shares soaring upon a strong Q3 earnings beat.

Video Transcript

BRAD SMITH: Welcome back to Yahoo Finance Live, everyone. Taking a look at shares of NKE in afterhours trading, as Nike has reported earnings. And this is for its fiscal third quarter. Revenues came in at $10.9 billion we'll round that off to, and the adjusted EPS coming in at $0.87 a share. That is a beat on both the top and bottom lines. You're seeing shares move higher by a little bit more than 5% a moment ago on that initial reaction that we're tracking.

Some of the other key call-outs that the company providing, Nike direct sales. That came in at $4.6 billion. That was up 15%. And then, additionally, Nike brand digital sales, that increased 19% or 22% on our currency neutral basis they say as well, led by 33% growth in North America. They also saw gross margin increase 100 basis points as well to 46.6%.

And then just briefly, also, we have a statement from John Donahoe, who is the president and CEO of Nike, saying, fueled by deep consumer connections, compelling product innovation, and expanding digital advantage, they have the right playbook to navigate volatility and create value through the drive to serve the future of sport.

Also calling out that their strong results this quarter showed that their consumer direct acceleration strategy is working, "as we invest to achieve our growth opportunities," end quote. Again, that from the president and CEO of Nike, John Donahoe. So really looking across some of the segments here very briefly as well. That Nike direct growth that we were talking about a second ago, the Nike brand digital business-- well, Nike direct, that was up 17%. Nike brand digital business, that also increased 22%, driven by double digit growth in North America, and then additionally overseas in their EMEA region.

And then they did see declines in greater China. And this is notable because the area, of course, the region has been a key focus for Nike, as a lot of the growth strategy within greater China, that certainly was hampered in this most recent quarter as a result of the zero tolerance COVID policies, and then additionally, just the availability and opening and reopening process and how that's different around the world. And so that is something that's going to be interesting to hear about as the company discusses it on their earnings call that starts just a little bit later on.

Just lastly here, from the CFO, Matt Friend, our third quarter results demonstrated Nike's ability to navigate through volatility while continuing to serve customers directly and digitally at scale. Again, there, you're taking a look at some of the actuals versus the estimates. Dave, I want to bring you into this as well, as we've been tracking shares here in afterhours trading.

DAVE BRIGGS: Yeah, it's interesting. Supply chain issues have clearly not helped Nike, nor has the war in Ukraine. Long-term, China could be a bit of a risk, depending on if China decides to help Russia in that war in the Ukraine and is then subject to sanctions. But theoretically, that probably does not happen.

So, just anecdotally, the direct-to-consumer model has been a huge success for Nike. Moving away from Foot Locker was a big headline recently, moving away from DSW. And that Nike app and the direct-to-consumer model has been a tremendous hit. And I think that really gives it a lot of growth potential over the next year. I think things are certainly looking up there, Brad.

BRAD SMITH: Yeah, Nike direct certainly has been an amazing part of the business strategy and that vision and seeing how that they've-- how they've rolled that out to really go more digital, go more direct to consumer, as we've been discussing. And specifically, the inventory levels are one thing that I'm looking for a little bit more data on as they continue to give us some more updates and once they get into the call a little bit later on.

But on the inventory supply specifically, they're saying marketplace demand continues to significantly exceed available inventory supply with a healthy pull market across their geographies. So that's going to be something for investors to pay close attention to, as you were mentioning the supply chain, just the availability of inventory and getting that to some of their partners, as well as just getting it into the hands of consumers and on their own platforms as well.