A woman shops for shoes at the Nike Factory Store at the Outlet Shoppes of El Paso, in El Paso, Texas on November 26, 2021.
Paul Rathje | AFP | Getty Images
On Thursday, Nike said it had a strong fiscal first quarter despite supply chain issues as well as declining sales in Greater China, its third-largest market by revenue.
But Nike shares fell more than 9% in after-hours trading as the company described problems with overstocked levels and aggressive steps it was taking to reduce them.
Nike and other retailers are facing supply chain headwinds such as increased delivery times and costs and disruptions from Covid-related store closings.
Here’s how Nike fared in its fiscal first quarter compared to what Wall Street expected, based on a survey of analysts by Refinitiv:
- Earnings per share: 93 cents vs. 92 cents expected
- Revenue: $12.69 billion vs. $12.27 billion expected
As shipping times and consumer demand increased this year, retailers responded by ordering goods earlier than usual. When shipping times began to improve rapidly, Nike CFO Matthew Friend said, that led to an increase in inventory.
Nike’s CEO noted that, mixed with consumers facing greater economic uncertainty, promotional activity has accelerated in the market, especially for apparel brands.
“As a result, we’re facing a new level of complexity,” Friend said on Thursday’s call with investors, adding that Nike will try to clear inventory for specific pockets of “late-season products,” particularly apparel.
Nike executives said their inventory in North America alone is up 65 percent from last year, reflecting a combination of late shipments for the past two seasons and early holiday orders that are now slated to arrive earlier than planned.
This led to the availability of goods for several seasons at the same time. Because of that, Friend said, “we decided to take that inventory and liquidate it more aggressively so we could put the latest and greatest inventory in front of the consumer in the right places.”
Nike reported net income for the three months ended Aug. 31 fell 22 percent to $1.5 billion, or 93 cents a share, from $1.87 billion, or $1.18 a share, a year earlier. early.
Revenue in the period increased 4% to $12.7 billion, compared with $12.2 billion a year earlier.
Recently, Nike has been changing its strategy and is looking to sell its sneakers and other merchandise directly to customers and cut back on what is sold through wholesale partners like Foot Locker. The company said Thursday that its direct sales rose 8% to $5.1 billion and sales for its digital brand rose 16%. On the other hand, sales for Nike’s wholesale sales rose 1%.
In its fiscal first quarter, Nike said its inventory rose 44 percent to $9.7 billion on its balance sheet from the same period last year, which the company said was driven by supply chain issues and partially offset by strong consumer demand. search.
Total sales in Greater China fell 16 percent to about $1.7 billion, compared with nearly $2 billion a year earlier. The company has faced business disruption in the region where the Covid lockdown has affected its business. Nike said in the previous quarter that it expected problems in Greater China to weigh on its business.
Meanwhile, total sales in North America, Nike’s biggest market, rose 13 percent to $5.5 billion in the fiscal first quarter, compared with roughly $4.9 billion in the same period last year. The sneaker giant has consistently stated that consumer demand, particularly in the US market, has not declined despite inflation.
The company said Thursday it expects fiscal second-quarter revenue to grow in the low double digits based on strong consumer demand, despite supply chain and foreign exchange headwinds.
Read the company’s earnings release here.