Nike (NKE) Q3 2021 earnings

Nike on Thursday reported higher third-quarter profits even though sales growth was hurt by widespread port congestion in the United States and ongoing store closures in Europe.

Although the global health crisis still leaves an overhang of uncertainty, Nike said it anticipates lockdowns will start to ease in Europe in April, and delivery windows will slowly improve in North America through the remainder of the year.

Its shares dropped nearly 4% in after-hours trading.

Here’s how Nike did during the quarter ended Feb. 28, compared with what analysts were expecting, based on a survey by Refinitiv:

• Earnings per share: 90 cents vs. 76 cents expected
• Revenue: $10.36 billion vs. $11.02 billion expected

Nike reported net income of $1.45 billion, or 90 cents per share, compared with $847 million, or 53 cents per share, a year earlier. That was better than the 76 cents per share that analysts were expecting, based on Refinitiv data.

Total sales rose to $10.36 billion from $10.1 billion a year earlier. That was lower than the $11.02 billion forecast by analysts.

In North America, revenue dropped 10% year over year, hurt by shipment delays that Nike said have been dragging on for more than three weeks. That also meant sales at its wholesale partners were affected, as businesses such as department stores and sporting goods outlets didn’t receive goods on time. They’ll likely now need to discount some of that merchandise to make space on the shelf for more in-season styles.

Backlogged West Coast ports, a global container shortage, and a truck driver shortage in the U.S. continue to be headaches for businesses from Nordstrom to Urban Outfitters to Peloton. Many have said they expect these issues to drag on until the second half of the year.

In its Europe, Middle East and Africa region, Nike said, sales at its brick-and-mortar retail stores dropped due to pandemic-related closures and restrictions while digital sales in those markets grew 60% in the latest period. It said about 60% of its stores in the region are open today, with some operating on reduced hours.

In Greater China, a region that is further along in recovering from the pandemic, sales climbed 51%.

Nike offered an outlook for the current quarter and fiscal year that anticipates inventory transit times will improve slowly across North America from here and lockdowns will ease across Europe come April.

It’s forecasting fiscal 2021 revenue to rise by a low-to-mid-teens percentage from the prior year. Analysts had been calling for full-year revenue growth of 15.9%, according to Refinitiv.

Fourth-quarter sales are expected by the company to be up 75% year over year, as the company laps a period when 90% of its owned stores were shut due to the pandemic. Analysts had been looking for growth of 64.3%.

Nike’s direct-to-consumer business grew 20% year over year, to $4 billion. And online sales for the Nike brand surged 59%, as consumers looked to add new sneakers and athletic gear to their wardrobes, even if they were stuck at home. The company said it booked $1 billion in sales online in North America for the first time.

“We continue to see the value of a more direct, digitally-enabled strategy, fueling even greater potential for Nike over the long term,” Chief Financial Officer Matt Friend said.

Nike’s e-commerce business is still on track to account for at least 50% of sales in the coming years, the company said. Nike has been investing more in digital, including its popular SNKRS app, to reach younger consumers online and reduce its reliance on third-party partners.

It also said it has recently had success testing new livestreaming formats, which remain more popular in Asia than in the U.S. But other companies, including Nordstrom and Walmart, are experimenting in America, too. During the third quarter, Nike said it started livestreaming in Japan, Germany and Italy.

Find the full press release from Nike here.