Nike shares fall as it reports lower earnings per share and revenues

• The sports giant proved analysts’ projections wrong for earnings per share and revenues, but shares fell dramatically.
• Nike’s stockpiles in North America have increased by 65 percent.
• The company anticipates the stronger dollar will cost it $4 billion in the current fiscal year.

Nike announced its quarterly profits were reduced on Thursday due to increased logistical spending and product markdowns, as the company pivots in a consumer market that is rapidly changing and pressured by inflation.

The sports giant proved analysts’ projections wrong for earnings per share and revenues, but shares fell dramatically because of surplus inventories in North America and a stronger dollar.

Nike anticipates the stronger currency will cost the company $4 billion in the current fiscal year, said Chief Financial Officer Matthew Friend during a conference call to discuss the company’s fiscal 2023 first-quarter results.

The profit for the quarter that ended August 31 was $1.5 billion, a decrease of 22%, but the resulting earnings per share surpassed forecasts. Revenues grew four percent to $12.7 billion.

While sales continued to decline in Greater China, a market severely impacted by Covid-19 limitations, Nike recorded outstanding sales in its other three regions, including a 13 percent increase in North America.

In its home market, other shops are giving offers as shoppers respond to higher gas, grocery, and other prices.

Conversely, Nike’s stockpiles in North America have increased by 65 percent, reflecting an increase in early purchases from retailers concerned about supply chain delays and improved delivery times.

According to Friend, Nike continues to observe robust consumer demand for desirable products but is working to dispose of a surplus of older, less popular things.

On a conference call with analysts, Friend stated, “We’re concentrating on selling off our late-season clothes stock.”

Neil Saunders, managing director of consultancy GlobalData, characterized Nike’s performance as “pretty good” but cautioned that the company was not immune to macro problems.

“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.”

In after-hours trade, shares plummeted 10.1% to $85.68.

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