Nike shares soared Tuesday after it reported better-than-expected results despite a hit to profit margins from heavy discounting because of excess inventory.
The sports giant has been one of several prominent brands to flag a supply glut, a dynamic that has forced especially generous promotions on some goods, especially apparel that is out of season.
Nike executives described the most difficult supply excesses as “behind us,” adding that available inventories — while still elevated — are at their lowest levels in four quarters.
Profits for the quarter ending at November 30 came in at $1.3 billion, the same as in the year-ago period while revenues jumped 17 percent to $13.3 billion. The results topped estimates in per-share profits and revenues.
“Consumer demand for Nike’s portfolio of brands continues to drive strong business momentum in a dynamic environment,” said Chief Financial Officer Matthew Friend. “We remain focused on what we can control.”
In the wake of supply chain problems in 2021, retailers ramped up deliveries in 2022 but have struggled to align product supply with demand.
In the most recent quarter, Nike’s gross margin declined compared with the prior quarter due to higher markdowns, especially in North America, Nike said.
Profit margins were also pressured by higher freight and logistics costs, as well as increased marketing expenses.
But those dynamics were countered by solid demand across most markets, including North America, where sales surged 30 percent from the year-ago period.
In China, where Nike’s results have been dented by repeat Covid-19 restrictions, sales slipped three percent. However, that was better than the 16 percent tumble in the prior quarter.
But Friend alluded to the drag of higher consumer prices, saying that while the company has seen strength over the last quarter, “those macro concerns have not abated.”
As a result, Nike is planning to restock at more “cautious” levels over the next six months, Friend said.
The company also plans further liquidation actions over the coming semester, which should result in profit margin pressures similar to the just-finished quarter, Friend said.
Shares jumped 12.9 percent to $116.50 in after-hours trading.
