Nike (NKE) earnings for the second quarter of 2023

Nike On Tuesday, it reported quarterly results that handily beat Wall Street’s expectations while raising its expectations, as the company touted its clearinghouse success with its massive inventory pile.

Nike shares rose more than 12% in after-hours Tuesday.

Here’s what Nike did in the fiscal second quarter compared to what Wall Street was expecting, based on a poll of analysts conducted by Refinitiv:

  • Earnings per share: 85 cents vs. 64 cents expected
  • Revenue: $13.32 billion Against the expected $12.57 billion

The company announced that net income for the three months ended November 30 was $1.33 billion, or 85 cents per share, compared to $1.34 billion, or 83 cents per share. a year ago.

Nike reported revenue of $13.32 billion, up 17% from $11.36 billion a year earlier.

Given the strong performance, Nike’s chief financial officer Matt Friend said on an earnings call that the company now sees revenue growth in the low teens for the full fiscal year.

Over the past three quarters, Nike has outperformed Wall Street expectations, but like other retailers, it has done so Struggle with bloated inventory Levels created by supply chain disruptions, increased consumer demand, and unpredictable transit times.

Inventories rose 43% to $9.3 billion in the prior quarter, compared to a year ago. A glut of merchandise led to widespread writedowns, which helped reduce Nike’s gross margin to 42.9% from 45.9% a year ago. However, inventories decreased from $9.7 billion in the previous quarter. John Donahue, CEO of Nike, said he believes the company has already passed its inventory peak. Gross margins are expected to decline by 2 percentage points to 2.5 percentage points in the next quarter, Siddig said, as divestment efforts continue.

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The company also saw a 10% year-over-year increase in selling and administrative expenses to $4.1 billion, led mostly by advertising and marketing costs and investment in Nike Direct as the company continues to spin away from wholesalers. The company expects those costs to increase by high single digits in the next quarter as well.

While the focus on Nike Direct was largely responsible for the increase in administrative expenses, the investment paid off. Nike Direct sales were up 16% for the quarter, to $5.4 billion, while digital sales were up 25%. Over the past several quarters, wholesale revenue has been virtually flat but is up 19% for the quarter.

Nike sales in China, its third-biggest market by revenue, were down 3% from a year ago, continuing a trend the retailer has been grappling with as the country deals with ongoing Covid lockdowns and a slowdown in retail spending. Total retail sales In the country, sales fell 5.9% in November from a year ago and sales of clothing and shoes fell 15.6%, according to China’s National Bureau of Statistics.

After, after Earnings for the first quarter of Nike’s fiscal year In September, executives said the company’s inventory had grown 65% over the past year in North America alone, and as a result, the company enacted an aggressive promotional strategy to clear merchandise and make room for new products.

The plan was a key part of Nike’s strategy to shift its sales directly to consumers and away from wholesalers by improving the store experience and enticing customers to shop directly from the company online.

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Nike on Friday announced its new “Jordan World of Flight Milan” store located in Via Torino, a popular shopping district in the Italian region known for its designer shoe stores.

This initiative reflects the steps Nike is taking to grow the company as a direct-to-consumer brand.

The store, dubbed a “first-of-its-kind retail experience” by the company in a press release, has a built-in lobby for members and will feature interactive shopping experiences designed for fans of the iconic sneaker brand.

Read the company’s earnings statement here.

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