Nike Surprises Investors and US $2 trillion dollar stimulus bill
Nike surprised investors
Nike reported revenue that was above analysts’ expectations (US $10.1 billion vs. US $9.8 billion expected, which is up 5% compared to the same period last year). Analysts were expecting a revenue drop due to China’s lockdown. Despite the revenue growth, profitability declined due to the effects of the global pandemic (and some restructuring in Latin America). During the peak quarantine in China in the middle of February, about 75% of Nike’s stores were closed. As of this week, about 80% of the company’s stores in Greater China have reopened.
Nike’s revenue growth was propelled by its direct-to-consumer business, which grew 13% during the quarter, bolstered by digital sales (up 36%). According to Nike, digital sales in Greater China alone was up more than 30%. This growth helped counteract store closures.
It remains to be seen whether Nike can repeat the same performance in the following quarter as North America is entering its period of lockdown, but the company claimed that it will roll out the same playbook that it employed in China elsewhere, to manage the disruption that came with COVID-19.
US stimulus bill getting closer to be passed
The US senate has come to an agreement on a relief bill to the tune of US $2 trillion (about 10% of US economic output). The bill has yet to be finalized, however. It is expected that voting of the bill will occur on Thursday. The promise of the stimulus bill has buoyed the US stock market in recent days. The full text of the bill has not been released yet, but some details are known:
- The bill will provide about US $500 billion in loans and assistance for larger companies, states, and cities. About US $62 billion will go to the US airlines in the form of loans and direct cash aid. Another US $17 billion in loans is to be given to companies deemed critical to national security (companies such as Boeing – although the legislation does not mention the company by name).
- Another US $350 billion is portioned for small business loans. The loans used for payroll, mortgage and rent will be forgiven by the government.
- The bill also gives cash directly to individuals, to the tune of US $1,200 for low and middle-income Americans.
- The remaining funds will go to expanded unemployment benefits, hospitals, development of a vaccination, tests and other efforts to curb the pandemic.
The size of this stimulus package dwarfs the US $800 billion that the government deployed in the 2008 financial crisis. Yet – it still may not be enough. Some experts argue that at best, these cash infusions will only last for several months, and a larger stimulus will be needed.