NIKE (NKE) expands in metaverse space with RTFKT takeover

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NIKE, Inc. NKE acquires a virtual sneaker and collectibles start-up, RTFKT. RTKFT offers unique virtual products and experiences created by leveraging the latest game engines, NFT, blockchain authentication, and augmented reality. The move is part of the company’s digital transformation plan. The buyout is expected to expand NIKE’s base in the Metaverse, with additional digital capabilities. However, the terms of the deal are not being disclosed.

Prior to that, NIKE launched the LeBron 19 styles in Fortnite with the goal of expanding into the digital gaming space. The company also launched Nikeland in collaboration with Roblox RBLX for customers to play games, log in, and dress in virtual clothes through a digital showroom, including Air Force 1 and Nike Blazer. Roblox’s Nikeland is available for free at Roblox.com.

Roblox has caused a stir with its video game platform, where users can hang out with others, play mini games, and invite other people to play. Users can also monetize their creations on the gaming platform by charging access fees to other players.

What else should you know?

NIKE has benefited from the continual shift in consumer behavior to digital, thanks to its effective digital ecosystem that includes its online site as well as business and business applications. In the first quarter of fiscal 2022, the company continued to experience strong revenue growth from the NIKE brand digital business despite the reopening of stores. NIKE brand digital revenue grew 29% year over year on a reported basis.

Even as stores reopen, the business continues to witness strong digital trends. Management expects revenue for fiscal 2022 and beyond to benefit from strong digital growth.

The return to sporting activity and good back-to-school sales led to incredible demand for NIKE products for the fifth consecutive season. Revenue in North America grew 15% on a reported and currency neutral basis, driven by double-digit growth in the Performance business during the fall season, the fervor of the Olympics, the WNBA season and the NBA Finals.

In EMEA, revenue rose 14% on a reported basis and 8% in currency neutral thanks to the EURO cut this summer, with NIKE players scoring higher goals than all other brands combined. The company’s Mercurial shoes accounted for more than half of those targets, resulting in higher demand for Mercurial shoes and replica jerseys during the tournament.

As a result of these factors, NIKE experienced revenue growth across all channels in the first fiscal quarter, driven by the growth of NIKE Direct. The NIKE Direct business benefited from continued normalization of owned retail businesses and continued momentum in the digital business.

Revenues from owned stores improved 24%, above pre-pandemic levels recorded in the first quarter of fiscal 2020. Sales at NIKE stores in North America accelerated by more than 50%. % due to return traffic to physical stores and improved experiences.

However, the company is reeling from continued supply chain challenges and plant closures due to COVID-19, which have resulted in product shortages. The company’s wholesale activities have reflected the impacts of supply constraints. He noted that transit times in North America and Europe deteriorated further in the first fiscal quarter due to port and rail congestion and labor shortages.

As a result, management has lowered its guidance for fiscal 2022 to reflect the impacts of 10 weeks of lost production in Vietnam since mid-July and expectations of high transit times to remain consistent with current levels. For fiscal 2022, the company expects revenue growth in the mid-range figures. The drop in sales is expected to be the result of supply chain congestion alone.

The company expects revenue growth to be flat or below single digit, particularly in the second quarter of fiscal 2022, due to the impacts of lost production due to plant closures and lead times. delayed delivery for holidays and spring. He expects lost production weeks and longer transit times to cause short-term inventory shortages in the market in the coming quarters.

NIKE also experiences higher ocean freight costs. The company expects rising air freight rates to continue to hurt gross margin throughout fiscal 2022. Gross margin is expected to increase by 125 basis points for fiscal 2022 due to the ‘increased costs of transportation, logistics and air freight to move inventory. For the second quarter of the fiscal year, the company expects the gross margin to increase at a slower pace than in fiscal 2022 due to higher planned investments in air cargo for the holiday season.

As a result, the shares of this company Zacks Rank # 3 (Hold) have gained 5.8% in the last three months compared to the industry6.3% growth.

Image source: Zacks Investment Research

Here’s how the other stocks behaved

We’ve highlighted a few top-ranked stocks from the set. Consumer discretionary space, namely Steven madden SHOO and Gildan sportswear GIL.

Gildan Activewear currently sports a Zacks # 1 (strong buy) rating. The company has an earnings surprise for the last four quarters of 85%, on average. GIL shares have gained 48.3% year-to-date. You can see The full list of today’s Zacks # 1 Rank stocks here.

Zacks’ consensus estimate for Gildan’s sales and earnings per share for the current year suggests growth of 4.5% and 24.4%, respectively, from figures released last year. Zacks’ consensus estimate for GIL’s earnings in 2021 is set at $ 2.38 per share, which has risen 12.3% in the past 30 days.

Steven Madden currently wears a Zacks Rank # 2 (Buy). The company has a surprise earnings for the last four quarters of 41.9% on average. SHOO shares are up 37.4% year-to-date.

Zacks’ consensus estimate for Steven Madden’s sales and earnings for the current fiscal year suggests growth of 50% and 170.4% from figures released last year, respectively. Zacks’ consensus estimate for SHOO’s earnings in 2021 is set at $ 2.35 per share, which has risen 11.9% in the past 30 days.

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NIKE, Inc. (NKE): Free Stock Analysis Report

Gildan Activewear, Inc. (GIL): Free Stock Analysis Report

Steven Madden, Ltd. (SHOO): Free Stock Analysis Report

Roblox Corporation (RBLX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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