Home News Nike’s efforts to clear excess inventory have resulted in profitable margins

Nike’s efforts to clear excess inventory have resulted in profitable margins

by SuperiorInvest

Dow component stocks Nike (NKE) are falling after the company released its latest earnings report.

The company beat analysts’ estimates for earnings and revenue, but that’s about it profit margins took a hit from markdowns to clear excess inventory. Higher shipping costs a stronger dollar they also hit Nike’s profits.

The athletic giant announced its fiscal first quarter net income $1.5 billion or 93 cents per share. Analysts had expected earnings of 92 cents per share. Revenue came in at $12.7 billion, compared with analysts’ estimates of $12.2 billion.

Gross margins at Nike fell to 44.3% from 46.5% a year ago. Nike executives said the decline was primarily in North America as the company had to liquidate excess inventory through its Nike Direct sales unit. Nike’s inventory hit $9.7 billion, a 44% increase from the prior period due to what executives said were supply chain issues.

Nike’s total sales in Greater China fell 16% to about $1.7 billion, compared to $2 billion a year ago, as sales were affected by the COVID-19 lockdown. Total sales in North America rose 13% to $5.5 billion, compared with $4.9 billion a year ago, as U.S. demand remained resilient despite rising inflation.

Nike shares fell more than 12% in early trading on Friday, leading to losses on the stock market Dow Jones Industrial Average. They have lost almost half of their value so far this year.

YCharts.

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