Nike Inc. held back in the third quarter of 2023 by its stocks

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The Oregon-based giant is certainly defying analysts with total sales up 14% to $12.4 billion. But at the same time, its net profit fell to 1.2 billion dollars, with a gross margin hurt by a profusion of inventory to be liquidated.

 

For Nike Inc (eponymous brand, Converse and Jordan), the third quarter of its fiscal year (ending in February 2023) was half fig and half grape. The sports equipment manufacturer has certainly recorded, between December and February 2023, a revenue increase in comparable of 14% to 12.4 billion dollars, driven by its sales of sneakers and sneakers. This is better than analysts’ forecasts, who were expecting a turnover of 11.47 billion dollars, according to a Refinitiv survey.

 

However, this quarter will be marked by a further erosion of its gross margin. Its net profit fell by 11% to 1.2 billion dollars over the period.

 

In detail: the turnover of the Nike brand alone, was 11.8 billion dollars, up 14%.

 

Sales of sports shoes contributed strongly to this, with a jump of 20% over the period. The United States and Europe did best, with increases of +31% and +28% respectively on a comparable basis. Growth was more modest (+14%) in Asia-Pacific-Latin America (excluding China). In this category, only China declined (-4%).

 

For its part, Converse’s sales increased by 8% to 612 million dollars.

 

Sales temporarily at half-mast in China

 

The third largest market in terms of revenue for the group as a whole, Greater China, despite the gradual lifting of health restrictions, recorded growth of only + 1% excluding the currency effect in the third quarter and even fell by 8% on a comparable basis to 1.99 million dollars over the period.

 

In the Middle Kingdom, the Nike brand alone saw its equipment and ready-to-wear sales fall sharply, by 36% and 16% respectively, while sales of sports shoes fell by only 4%. This trend can be explained – apart from the health context – by a change in usage, in favor of local sportswear brands such as Anta and Li Ning.

 

The Chinese market has not yet returned to pre-COVID sales levels, according to Citi Research. The firm expects a rebound, at the earliest, from April. The CEO of Nike confirms, however, the good fundamentals of the country. He recalls that the Middle Kingdom has the advantage of being an important growth market, where sport and wellness are a basic trend and where the customer desire for product innovation and style has remained intact.

 

Outside China, all the group’s markets are in the green, particularly in North America and Europe, driven by e-commerce sales of the Nike brand (+24%).

 

Excessive but not catastrophic inventories

 

The disruption of supply chains, following the covid, has however marked the results of this third quarter. To liquidate its excess inventory, the group has pursued an aggressive discounting policy, thus eroding its margin.

 

Contrary to what its CEO, John Donahoe, had announced, the peak of the stocks produced had not yet been reached in the second quarter. It was not until the end of 2022 that it was passed. The situation has affected the group’s gross margin, which fell from 46.6% to 43.3% in the third quarter. Inventory costs, boosted by higher product and transportation costs, increased by 16% compared to the same period last year, to $8.9 billion.

 

Still, the situation is, according to its chief financial officer, Michael Friend, a “huge” improvement compared to the increase in its inventory costs, which were 43% in the second quarter.

 

The situation does not worry, too much, the equipment manufacturer, in view of a competition (Adidas, Puma) also struggling with the same problems of overstocking.

 

The CEO of Nike welcomed a “solid growth” in the quarter despite a difficult period. He also told the media CNBC, that the group was on track to close its fiscal year 2023 with a healthier inventory level.

 

Stronger and more agile” than before the pandemic, the group is counting on product innovation, a “reasonable” continuation of its wholesale partnerships (especially with Foot Locker) as well as an increase in its priceswith a surgical approach” on its entire portfolio of brands to quickly regain balance.

 

Read also >Well oriented in 2022, Cucinelli also sees 2023 in pink

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The Oregon-based giant is certainly defying analysts with total sales up 14% to $12.4 billion. But at the same time, its net profit fell to 1.2 billion dollars, with a gross margin hurt by a profusion of inventory to be liquidated.

 

For Nike Inc (eponymous brand, Converse and Jordan), the third quarter of its fiscal year (ending in February 2023) was half fig and half grape. The sports equipment manufacturer has certainly recorded, between December and February 2023, a revenue increase in comparable of 14% to 12.4 billion dollars, driven by its sales of sneakers and sneakers. This is better than analysts’ forecasts, who were expecting a turnover of 11.47 billion dollars, according to a Refinitiv survey.

 

However, this quarter will be marked by a further erosion of its gross margin. Its net profit fell by 11% to 1.2 billion dollars over the period.

 

In detail: the turnover of the Nike brand alone, was 11.8 billion dollars, up 14%.

 

Sales of sports shoes contributed strongly to this, with a jump of 20% over the period. The United States and Europe did best, with increases of +31% and +28% respectively on a comparable basis. Growth was more modest (+14%) in Asia-Pacific-Latin America (excluding China). In this category, only China declined (-4%).

 

For its part, Converse’s sales increased by 8% to 612 million dollars.

 

Sales temporarily at half-mast in China

 

The third largest market in terms of revenue for the group as a whole, Greater China, despite the gradual lifting of health restrictions, recorded growth of only + 1% excluding the currency effect in the third quarter and even fell by 8% on a comparable basis to 1.99 million dollars over the period.

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The Oregon-based giant is certainly defying analysts with total sales up 14% to $12.4 billion. But at the same time, its net profit fell to 1.2 billion dollars, with a gross margin hurt by a profusion of inventory to be liquidated.

 

For Nike Inc (eponymous brand, Converse and Jordan), the third quarter of its fiscal year (ending in February 2023) was half fig and half grape. The sports equipment manufacturer has certainly recorded, between December and February 2023, a revenue increase in comparable of 14% to 12.4 billion dollars, driven by its sales of sneakers and sneakers. This is better than analysts’ forecasts, who were expecting a turnover of 11.47 billion dollars, according to a Refinitiv survey.

 

However, this quarter will be marked by a further erosion of its gross margin. Its net profit fell by 11% to 1.2 billion dollars over the period.

 

In detail: the turnover of the Nike brand alone, was 11.8 billion dollars, up 14%.

 

Sales of sports shoes contributed strongly to this, with a jump of 20% over the period. The United States and Europe did best, with increases of +31% and +28% respectively on a comparable basis. Growth was more modest (+14%) in Asia-Pacific-Latin America (excluding China). In this category, only China declined (-4%).

 

For its part, Converse’s sales increased by 8% to 612 million dollars.

 

Sales temporarily at half-mast in China

 

The third largest market in terms of revenue for the group as a whole, Greater China, despite the gradual lifting of health restrictions, recorded growth of only + 1% excluding the currency effect in the third quarter and even fell by 8% on a comparable basis to 1.99 million dollars over the period.

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Victor Gosselin
Victor Gosselin
Victor Gosselin is a journalist specializing in luxury, HR, tech, retail, and editorial consulting. A graduate of EIML Paris, he has been working in the luxury industry for 9 years. Fond of fashion, Asia, history, and long format, this ex-Welcome To The Jungle and Time To Disrupt likes to analyze the news from a sociological and cultural angle.

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