Nike sales may soar as discounts draw shoppers; margin squeeze looms

NIKE is expected to report a big bump in second-quarter sales, as it offered deep discounts on its shoes and sportswear to keep the interest of recession-wary shoppers in its brand and clear excess inventory.

Analysts are projecting a near 11 per cent jump in quarterly sales as a bounce in its US business may help overcome weakness in the China market.

“While retailers were initially worried about the amount of Nike inventory being shipped, the consumer is showing up and buying the Nike brand,” Credit Suisse analyst Michael Binetti wrote in a note on Friday (Dec 16).

“Most retailers have been worryingly low on Nike inventory for 2 years and are just happy to have enough to drive their apparel & footwear categories at this point,” Binetti said.

The context

Brokerage Telsey Advisory Group last week said better-than-expected sales from retailers like Foot Locker and Dick’s Sporting Goods Inc were pointing to Nike’s success in attracting inflation-weary shoppers with discounts.

While those discounts have helped clear unsold stocks at Nike, which was sitting on US$9.7 billion of inventory at the end of the last quarter, they may have come at a cost, as analysts are projecting a downbeat margin target.

SEE ALSO

Starbucks to Nike report steep sales drops brought by China’s lockdowns

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

Lockdowns in China in October and November are also expected to be a drag on its sales in the region for the second quarter. The company reported a 20 per cent slump in Greater China revenue in the same period last year and a 16 per cent fall in the prior quarter that ended Aug 31.

However, leaner inventory, the reopening of China and strong demand from sneakerheads are expected to set the company up for a better second half of the year. REUTERS