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Nike (NKE) earnings Q4 2022 earnings

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Nike Air Jordan shoes are seen in the shop in Krakow, Poland on August 26, 2021.

Jakub Porzycki | Nurphoto | Getty Images

Nike on Monday said demand for sneakers and sportswear largely held up within the fiscal fourth-quarter, despite a Covid lockdown in China and a tougher consumer environment within the U.S.

But the corporate said challenges comparable to higher transportation costs and longer shipping times are persisting.

Shares fell about 3% in aftermarket trading, despite the corporate topping Wall Street’s earnings and sales expectations.

Nike anticipates first-quarter revenue shall be flat to barely up versus the prior 12 months, because it continues to administer Covid disruption in Greater China. It said it anticipates full-year revenue will grow by low double-digits on a currency-neutral basis.

Chief Financial Officer Matthew Friend said Nike factored elevated ocean freight costs, increased product costs, supply chain investments and better levels of markdowns into its forecast.

On a call with analysts, he said the corporate is “optimistic” because it enters the brand new fiscal 12 months. He said production has surpassed prepandemic levels and inventory is “flowing again into our largest geographies.”

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“We proceed to closely monitor consumer behavior, and we’re not seeing signs of pullback at this time limit, and so we proceed to execute the strategy and the plan now we have, which is working,” he said.

Here’s how Nike did in its fiscal fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

  • Earnings per share: 90 cents vs. 81 cents expected
  • Revenue: $12.23 billion vs. $12.06 billion expected

The corporate reported net income for the three-month period ended May 31 of $1.44 billion, or 90 cents per share, compared with $1.51 billion, or 93 cents per share, a 12 months earlier.

Sales dropped to $12.23 billion from $12.34 billion a 12 months earlier.

Nike is in the midst of a technique shift, as the corporate sells more merchandise on to shoppers and trims back the quantity sold by wholesale partners comparable to Foot Locker. Its direct sales grew 7% to $4.8 billion within the quarter versus the year-ago period. Nike’s wholesale business trends were the alternative. Sales in that division dropped 7% to $6.8 billion.

In North America, Nike’s largest market, total sales fell by 5% to $5.11 billion within the fourth quarter.

In Greater China, its sales took a much bigger hit as a consequence of lockdowns. Total sales within the country dropped by 19% to $1.56 billion versus $1.93 within the year-ago period.

Yet Friend said the declines need to do with fleeting aspects, not shopper loyalty and desire for Nike products. For 3 consecutive quarters, he said, consumer demand has exceeded available inventory. Now, he said, supply is finally normalizing.

Nike faces a posh backdrop, nevertheless. As the costs of gas, groceries and more rise, some consumers may skip over discretionary items or trade right down to lower-priced brands. Nike’s direct sales strategy comes with risk if its rivals wind up with more shelf space and better sales at wholesale retailers. And as supply chain challenges proceed, merchandise can get stuck within the mistaken spot or arrive too late.

The corporate is paying about five times the speed it paid prepandemic to place product in a container on a ship and move it from Asia to the U.S., Friend said. He said transit times are about two weeks longer than prepandemic.

Within the three-month period, inventory rose to $8.4 billion — up 23% versus the year-ago period — driven by longer lead times from ongoing disruptions in the provision chain.

Shares of Nike closed on Monday at $110.50, down 2.13%. As of Monday’s close, Nike shares are down about 34% thus far this 12 months. It’s underperformed the S&P 500, which is down about 18% through the same period. The corporate’s market value is $173.9 billion.

Nike said its board authorized a recent four-year, $18 billion stock buyback program this month. It can replace the corporate’s $15 billion share buyback program, which can end in the approaching fiscal 12 months.

Read the corporate’s earnings release here.

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