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Nike’s stock stays in red territory despite strong quarter

NIKE Inc.’s (NYSE: NKE) shares were down 1.2% in afternoon hours on Friday despite the company posting strong results for the second quarter of 2020. Nike beat revenue and earnings expectations for the quarter but gross margins fell below estimates causing the stock to drop.

Revenues grew 10% while profits rose over 30% in the quarter compared to the prior-year period. Revenues increased across all segments and regions. The company sees major opportunity in apparel. During the quarter, revenue in women’s sportswear apparel grew double-digits. The Jordan brand is performing well both in North America and internationally.

On its quarterly conference call, the company said digital commerce revenue grew 38% in the second quarter, fueled by a strong start to the holiday season. Digital sales increased more than 70% in North America on Black Friday while buying members grew 45% from last year.

In China, Nike generated around $0.5 billion in revenue on Single’s Day, reflecting the strength in its brand and product portfolio. The company stated that China is the world’s most compelling digital marketplace in many ways. While the digital share of the business in Greater China is Nike’s largest compared to other geographies, the company still sees massive potential in the region.

Nike continues to focus on investing in areas which have the greatest potential to drive growth and the company is looking to build capabilities which will truly differentiate it. Following the results announcement, a number of analyst firms have raised price targets on the stock.

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