Nike reported lower quarterly profits Thursday on increased logistics spending and a hit from product markdowns, as it pivots in a fast-changing consumer market challenged by inflation.
The sports giant topped analyst estimates for both earnings
per share and revenues, but shares fell sharply as it faced questions over
excess inventory in North America and signaled the strengthening dollar would
dent results.
Nike expects a $4 billion hit from the stronger dollar in
its current fiscal year, said Chief Financial Officer Matthew Friend on a
conference call over its fiscal 2023 first quarter results.
Profit for the quarter ending August 31 was $1.5 billion,
down 22 percent but translating into earnings per share that exceeded
expectations. Revenues rose four percent to $12.7 billion.
While sales once again fell in Greater China, a market hard
hit by Covid-19 restrictions, Nike notched higher sales in its other three
regions, including North America, where revenues jumped 13 percent.
But the company is facing a much more promotional
environment in its home market, where other retailers are offering deals as
consumers respond to costlier gasoline, groceries and other household items.
At the same time, Nike has seen a 65 percent jump in
inventories in North America, an increase that reflects an uptick in early
orders from retailers concerned about supply chain delays, as well as improving
delivery times.
Friend said Nike has continued to see strong consumer demand
for choice products, but that it is working to offload a glut of older items
that have generated less interest.
"We're focused on trying to clear through that
late-season apparel inventory," Friend told analysts on a conference call.
Neil Saunders, managing director of consultancy GlobalData,
said Nike's results were "relatively strong," but warned it was not
immune to macro challenges.
"At present, consumer sentiment and spending are
holding up relatively well and we believe this bodes well for the upcoming
quarter. However, as we move into 2023 and beyond the demand picture could
soften," Saunders said.
"Nike is in a better position than most brands, but it
may find it harder to punch out such good numbers as it moves into the back end
of its fiscal year."
Shares fell 10.1 percent to $85.68 in after-hours trading.