Nike trading at pre-COVID levels, though it varies by region Nike’s Q3 performance to the end of February was impacted by COVID-19 disruptions, particularly in North America and EMEA. Group revenues +3% (down 1% at constant FX) with the standouts being Nike Digital +54% and China with revenues +42% at constant FX (2nd consecutive $2bn quarter). Nike’s owned and partner digital was over 35% of business in Q3. Group gross margin improved 130bps due to higher full-price sales and direct sales. Nike’s North America revenues declined 11% at constant FX, largely due to the global container shortages and US port congestion, which started in December and delayed Q3’s flow of inventory by more than 3 weeks. There have been supply shortages relative to continued strong marketplace demand, which also impacted the timing of wholesale shipments, according to Nike. Nike expects to capture this delayed revenue in its Q4. EMEA sales fell 9% at constant FX. Physical retail was impacted with c.45% of NIKE-owned stores closed for the last 2 months of Q3. This was partially offset by 60% growth in digital sales. Management said excess inventory in EMEA is manageable and lower than during the first lockdown. Inventory is expected to normalise by Q1 2022. Currently, c.65% of its EMEA stores are open or on reduced hours. Where stores are open, it is seeing strong comparable sales yoy. Nike Group guidance is for low to mid-teen growth for FY21 (raised from low teens at Q2), with Q4 revenues roughly 75% of the prior year. Gross margin is now expected to be up 75 bps yoy due to mix shift to digital, partially offset by higher logistics costs and higher mark-down in EMEA to clear stock. In FY22, management expects strong revenue growth, but will give specific guidance on its Q4 call. Read-across to JD: Positive – strong end demand from the consumer for athleisure JD has reported to the end of January so Nike provides colour on one extra month. We are encouraged that end demand remains strong and this included its strategic partners, according to Nike. Nike’s shipping issue appears to be more US-related although most UK retailers have had their own issues, exacerbated by Brexit. Nike’s management did comment that: ‘we will continue to prioritize inventory for our strategic partners and for NIKE Direct. And when we look at where marketplace inventory is today, it’s down high double-digits vs. where it was a year ago. And so there is strong demand for that inventory across our strategic partners and NIKE Direct, and we intend to continue to fulfil that demand in both of those locations’.