Nike soars 12% on quarterly sales data
Revenue rose 17% to $13.3B, beating analysts’ expectations by $700M
Shares of Nike Inc. jumped 12% after the retailer reported its quarterly sales exceeded Wall Street estimates and that bloated inventory stockpiles are easing.
Global revenue rose 17% to $13.3 billion in the quarter that ended Nov. 30, about $700 million more than analysts had projected, according to the company. Its gross margin, a key gauge of profitability, also exceeded expectations, and executives said year-end performance proved strong.
“Our holiday season momentum has continued through the first few weeks of December, despite operating in a largely promotional marketplace,” Chief Financial Officer Matt Friend said during a conference call.
Shares of Nike Inc. rose 12% in premarket trading Wednesday in New York and held the gain to close at $115.78 on the day. The stock has declined roughly 30% this year through Wednesday’s close.
While inventories jumped 43% from a year earlier, the increase was a slight improvement from last quarter’s 44% increase. Company executives said the number is inflated by abnormally low levels a year ago when covid-19 pandemic measures in the manufacturing hub of Vietnam and long freight times disrupted retail businesses around the world.
Wedbush Securities analysts said Nike’s inventory situation is getting better with apparel clearance units declining over the past 90 days. Meaningful improvement has been seen in North America, which “is key because the domestic business had the biggest inventory glut,” Wedbush’s Tom Nikic wrote in a note.
Excess merchandise at Nike and across the apparel industry has prompted promotional activity that has eroded profitability. Nike’s gross margin fell 300 basis points to 42.9% as management moved aggressively to liquidate inventory, especially in North America. The company plans to sell excess merchandise via off-price retailers through the rest of the year.
Nike upped spending on marketing in an effort to lure in more shoppers. So-called demand-creation expenses were up 8% in the quarter to $1.1 billion, mostly via a spike in advertising.
Sales beat expectations in all regions except China. Nike said demand for its products grew there, but the company experienced significant disruption due to covid lockdowns. Executives said they’re closely monitoring the situation as the government eases its zero-covid policy.
For the full fiscal year, which ends in mid-2023, Nike said it expects revenue growth in the low teens on a currencyneutral basis. The company maintained its projection that gross margin will fall 200 to 250 basis points.