Nike set to go on sale as it deals with excess inventory and falling inventory

Sports retailer Nike (NKE) is heading into the sell-off as it faces less than ideal conditions of excess inventory and falling share prices.

The company said its inventories in North America, its largest market, rose 65% in the most recent quarter and 44% year over year overall. This comes against the backdrop of a rocky 2021, as the sports retail giant struggled with a shortage of inventory. However, now the company has too much stock, especially clothes.

Last year, Nike’s factories in both Vietnam and Indonesia were shut down due to COVID outbreaks, causing delays, Donahoe said. However, as production picked up, several orders came in at once. He added that the company still has some orders for goods on the way.

“We effectively have a couple of seasons going out at the same time,” CEO John Donahoe said in a call with analysts Thursday.

While supply chain issues are showing signs of improvement, inflationary pressures mean consumers are frugal. Other major retailers such as Target (TGT) and Walmart (WMT) have also reported overstocked inventories this year.

Nike shares are down over 11% through midday Friday. To crowd out unwanted inventory, Nike will seek to ship goods to its factory outlets, advertise online, and boost sales to discount retailers like TJ Maxx. In recent years, however, the company has turned its back on discount retailers.

Donahoe remains confident the company will weather the storm.

“We’re seeing strong consumer demand in North America right now,” said Donahoe.

“There is no sign of softness.”

With Halloween, Thanksgiving, and the holiday season just weeks away, shoppers can expect plenty of discounts. Nike set to go on sale as it deals with excess inventory and falling inventory

Fry Electronics Team

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