Stocks Finish Friday Lower, But Nike Gets an After-Hours Earnings Boost

Friday was a crazy day for the stock market, as investors had to deal with a wild combination of factors affecting trading. The expiration of stock and index futures and options contracts, the reconstitution of the Nasdaq-100 Index, and the addition of Tesla (NASDAQ: TSLA) to the S&P 500 (SNPINDEX: ^GSPC) all introduced wild cards to the regular trading day. By the end of the session, the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500, and Nasdaq Composite (NASDAQINDEX: ^IXIC) were all down, but they finished well off their worst levels of the day.

Index

Percentage Change

Point Change

Dow

(0.41%)

(124)

S&P 500

(0.35%)

(13)

Nasdaq Composite

(0.07%)

(9)

Data source: Yahoo! Finance.

It’s highly unusual for a stock to report earnings after the close on Friday afternoon, especially when the reporting date in question matches up with a popular options expiration date. However, that’s exactly what Nike (NYSE: NKE) did this week, and investors got some good news from the athletic apparel and footwear giant.

Nike just does it

Nike’s stock was higher by nearly 4% after hours, after falling a bit more than 2% in the regular session. Nike’s fiscal second-quarter results gave investors a lot of what they’d hoped to see and represented another positive sign that the consumer economy is still running strong.

Image source: Getty Images.

Nike reported strong revenue growth. Total sales climbed 9% from prior-year levels, boasting better top-line results from across all its geographical regions. The Greater China region fared extremely well, seeing sales jump 24%.

As most investors would imagine, Nike’s direct-to-consumer sales did extraordinarily well. Overall, Nike direct sales climbed 32% year over year, and digital sales of the Nike brand specifically soared 84% from year-earlier results. Even with lower revenue from its wholesale business and from Nike-owned retail locations, the athletic giant was able to hold up well overall.

That solid performance fell through to the bottom line. Nike’s earnings per share were higher by 11% from last year’s fiscal second quarter.

From a balance sheet standpoint, Nike had plenty of good things to say. Inventory levels were down 2% from the prior-year period, returning to what the company called “healthy levels globally.” The athletic retailer pointed to a balance of cash and short-term investments of $11.8 billion, due largely to a timely capital raise in the bond market. Including credit facilities that currently aren’t drawn, Nike has liquidity of $15.8 billion — ample resources to deal with what the COVID-19 pandemic might throw at it in the near future.

A few things left for Nike to do

Just about the only thing that Nike didn’t get done was to announce in its earnings release when it would start to do stock repurchases once again. Nike pays a very small dividend with a yield of less than 1%, as most of its capital return to shareholders has come in the form of share buybacks. For instance, prior to Nike’s suspending its buybacks, the company had bought back $4 billion under its current repurchase program. That still leaves $11 billion left for Nike to deploy when it chooses.

What’s more important, though, is that shoppers are still willing to pay up for premium merchandise from favored retailers. With many consumers in financial distress, the fact that Nike has been able to keep its revenue growing is a testament to the popularity of its products. That should help Nike keep climbing well into the future.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nike and Tesla. The Motley Fool has a disclosure policy.

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