Nike Inc. posted another quarter of inventory building, but quarterly sales beat Wall Street estimates, allaying investor concerns and sending shares higher in late trade.
Global sales rose 17 percent to $13.3 billion for the quarter ended November 30, beating the median estimate of $12.6 billion compiled by Bloomberg. Sales exceeded expectations in all regions except China. Gross margin, a key gauge of profitability, also exceeded expectations, and executives said year-end performance was strong.
“Our holiday season momentum has continued into the first few weeks of December despite operating in a largely promotional market,” Chief Financial Officer Matt Friend said during the company’s conference call.
Shares were up 13 percent Tuesday as of 5:39 p.m. in after-market trading in New York. The stock is down 38 percent this year through Tuesday’s close.
While inventories are up 43 percent year-on-year, company executives said the figure was inflated by unusually low levels a year earlier, as pandemic measures at manufacturing hub Vietnam and long freight times disrupted retail stores around the world.
Excess merchandise at Nike and throughout the apparel industry has led to promotional activities that have eroded profitability and frightened investors. Nike’s gross margin fell 300 basis points to 42.9 percent as management acted aggressively to liquidate inventory, particularly in North America. The company plans to sell excess merchandise through off-price retailers by the end of the year. Despite this, gross margin still beat analysts’ estimates.
Nike increased marketing spend to attract more shoppers. So-called demand generation spend rose 8 percent to $1.1 billion in the quarter, primarily due to a surge in advertising.
Sales in China fell 3 percent to $1.79 billion below analysts’ median estimate. Nike said demand for its products has increased in China despite significant disruption due to Covid lockdowns. Executives said they were closely monitoring the situation as the government eases its zero-Covid policy.
For the full fiscal year ending mid-2023, Nike expects currency-neutral sales growth in the low teens. The company stuck to its guidance that gross margin would fall by 200 to 250 basis points.
https://www.independent.ie/business/world/nike-reports-robust-sales-amid-sustained-inventory-pileup-42235172.html Nike reports robust sales amid persistent inventory levels
