Nike is anticipated to regain profitability in the first quarter, propelled by strong online sales and a surge in demand from Chinese consumers. Following an unexpected loss in July, analysts predict that Nike’s improved performance will be driven by the growth of e-commerce sales and the return of in-person schooling.

Due to COVID-19 lockdowns that led to the closure of malls and department stores, consumers turned to online shopping, resulting in a significant increase in direct sales from Nike’s website. In the previous fiscal quarter, Nike reported an impressive 75% surge in online sales, and this trend is expected to continue. Consequently, numerous Wall Street analysts have raised their price targets for Nike stock in recent weeks.

Data from StyleSage, an apparel analytics firm, shows that in the first quarter, 12% of all footwear available on consisted of new sneaker and shoe styles, compared to 10% in the previous quarter. Furthermore, Nike experienced a 17% sell-out rate of footwear in the first quarter, a notable improvement from the 6% sell-out rate in the fourth quarter. These figures demonstrate increasing customer demand and investments in new online offerings. Similar trends were observed in online sales for Nike clothing.

Online sales now contribute to almost one-third of Nike’s total revenue, surpassing the company’s target for 2023. Additionally, Nike’s adjusted sales in China during the first quarter are projected to have grown by over 10% as the country gradually lifted lockdown measures. The global athletic footwear and apparel industry has witnessed a resurgence in sales, particularly in North America. Nike is well-positioned to benefit from the back-to-school season, which is expected to further bolster its financial performance.

Refinitiv estimates that Nike will report a net profit of $729 million in the most recent quarter, a sharp contrast to the $790 million loss incurred in the fourth quarter. In an effort to streamline operations and prioritize online investments, Nike announced in July that it would lay off corporate employees starting October 1st and terminate several major retail contracts, including those with Dillard’s and Zappos. Furthermore, Nike decided to abandon its plans for a large shoe manufacturing facility in Arizona, opting to invest in other areas instead.

Throughout this year, Nike has actively positioned itself as a strong advocate for various social and political movements, such as Black Lives Matter and Time to Vote. The company has launched inclusive advertising campaigns and introduced a maternity line. By aligning itself with these prominent causes, Nike aims to establish a deeper connection with consumers while simultaneously driving sales.

As Nike prepares to announce its earnings report after the market closes on Tuesday, investors hold an optimistic outlook for the company’s future. The combination of robust online sales, increased demand from China, and a recovering global market has positioned Nike for a profitable first quarter.

1. Nike Official Website
2. Nike’s Earnings Report on CNBC