Here’s Why Nike Stock Pulled Back Today


What happened

Shares of Nike (NYSE:NKE) pulled back on Friday after the company announced financial results for the third quarter of its fiscal 2021. It grew both revenue and profits from last year, although not as much as Wall Street had expected. Because of this, Nike stock was down 4% as of 10:45 a.m. EST today.

So what

For the third quarter, Nike reported revenue of $10.4 billion, which was technically up 3% year over year. But there are a few meaningful clarifications to make. First, adjusting for currency fluctuations, the company’s revenue was down 1%. Second, sales for the Nike brand were down 2% when adjusting for currency fluctuations; the growth came from the company’s Converse brand, which was up 8% from last year. And third, analysts had expected revenue closer to $11 billion, so these top-line results fell far short of expectations.

A frustrated man lays his head down in defeat with a down stock chart in the background.

Image source: Getty Images.

Nike had a perfectly reasonable explanation for the revenue miss. In the third-quarter conference call, CFO Matthew Friend said, “In Q3, disruption in the global supply chain due to container shortages, transportation delays, and port congestion has interrupted the flow of inventory supply.” As a result, Nike experienced over three-week delays in some cases, hurting its wholesale business in particular. 

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Now what

While Nike’s top line fell slightly short of investors’ hopes, don’t overlook the bottom line. The company reported net income of $1.4 billion, which was up a whopping 71% from last year. Furthermore, the company now has cash, cash equivalents, and short-term investments of over $12.5 billion. It had paused share repurchases last year due to the uncertainties surrounding the pandemic. But given its outstanding financial position and improving operating metrics, Nike is ready to start buying back stock again in the fourth quarter. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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