Nike Stock Surges As Results Suggest Coronavirus Hasn’t Halted Consumer Spending

Nike shares surged 11% after hours on Tuesday after the sneaker giant and Dow component offered hope that consumers haven’t totally lost their spending muscle amid the escalating global coronavirus crisis. 

Nike stock climbed to $80 Tuesday evening, after jumping 15% to close at $72 during regular trading, as it reported better-than-expected sales in the fiscal third quarter that ended February 29. 

Before Tuesday’s gain, Nike had lost about 40% of its value this year as the outbreak, which originated in China, had forced it to shut three-quarters of its stores there. Nike’s sales in China, its key growth market, last quarter fell 4% after 22 straight quarters of double-digit gains.

With the outbreak spreading globally, the Beaverton, Oregon-based company said that since March 16, it’s shut all of its owned stores in North America, its largest market, as well as Europe and other regions outside of China, Japan and South Korea. 

With groups including U.S. malls and restaurants seeking government bailouts amid the shuttering of stores and the threat of a looming global recession, Nike’s results are one good sign for the state of consumer spending, which in the U.S. represents about 70% of the economy. 

Nike CFO Andy Campion said that what shoppers spend online in North America has surged in triple digits in the past week and is approaching holiday sales level. In another sign of demand, some new products the company introduced online in the past two weeks in the home market were sold at full price, he said.

Nike said it’s engaging with consumers via its mobile apps and encouraging “virtual participation” as consumers stay at home and practice social distancing. 

“We are seeing strong digital growth in the U.S.,” Campion said. “While stores close, we will be digital with activity apps.” 

Campion added that Nike has doubled its capacity to distribute online orders in the last few days. The company said it’s working with partners including the European online retailer Zalando and sharing information as online demand is expected to pick up even more—a trend that’s also seen in increased food and grocery delivery orders despite the fact they won’t be able to make up for the shuttered brick-and-mortar business.

Nike also said that what it’s observed in China and some other Asian markets offers a hopeful template about what could come in the U.S. and Europe. 

Nike CEO John Donahoe said store visits in China had picked up each week since most of its stores there reopened, with consumers wearing masks, after a “containment” phase of five to six weeks. A “triple-digit” increase in online sales while stores were closed continued to pick up its pace even after stores reopened. A similar pattern was observed in Japan and Korea, he said. 

“Consumer demand for those products remains strong,” he said. “Global culture of health and wellness remains unabated. People all over the world are making a habit of making sports a daily habit.”

The coronavirus outbreak may well be expected to deal a blow to cash-strapped retailers and even some malls, but Nike’s results show consumers will still open their wallets for discretionary purchases they want. 

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