Nike Drops as Macro Continues to Weigh on Outlook

Nike (NKE:US) shares fell 2% on Friday after the sportswear company offered a weaker-than-expected forecast during the post-earnings analyst call.

While Nike’s inventory levels were better than expected, CEO and President John Donahoe said that the company has been selling excess merchandise with discounts, which has weighed on margins and profits.

The company reported adjusted earnings per share (EPS) of $0.66, somewhat in-line with the consensus of $0.67. Revenue increased by 4.8% year-over-year to $12.83 billion, topping the consensus of $12.59 billion.

Region-wise, Nike said that its North America and EMEA revenues jumped 5% and 3% respectively, while Greater China's revenue surged as much as 16% to $1.81 billion. Another positive was that direct sales jumped 15% to $5.5 billion.

“NIKE’s strong results make clear that our strategy is working,” said Donahoe.

Sector-wise, Nike’s core business – Footwear – saw its sales jump 7% to $8.55 billion, while Apparel revenue ticked lower YoY to $3.23 billion.

On a negative note, gross margins fell 140 basis points to 43.6% with Nike attributing the decline to “higher product input costs and elevated freight and logistics costs, higher markdowns and continued unfavorable changes in net foreign currency exchange rates — partially offset by strategic pricing actions and lapping higher inventory obsolescence reserves in Greater China in the prior period.”

Moreover, the company’s management said on the earnings call that it expects its FY24 revenue to grow mid-single digits while the expected F1Q revenue growth of flat to up-low single digits missed analyst consensus for 4%.

Congress members Ro Khanna and Kathy Manning were trading Nike shares in recent months, although their trade sizes were relatively small.