Nike shows sales strength; profit falls just short of estimates
NIKE fell in late trading after the company’s outlook for the full year failed to win over Wall Street.
The sportswear giant expects full-year revenue for fiscal 2024 to grow in the mid single-digits, led by its direct-to-consumer business, Nike chief financial officer Matthew Friend told analysts during a conference call. Analysts project growth of close to 6 per cent, according to estimates compiled by Bloomberg.
Earlier on Thursday (Jun 29), the company reported sales that outpaced Wall Street’s expectations while profit fell just short of estimates. The results show Nike is still working to sell off its high stockpiles of merchandise that have eroded profitability.
“Overall, Nike is a solid brand, and it is not suffering from an existential crisis,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients. “However, it isn’t on the front foot either, and has to accept that the year ahead will be one of resetting, retrenching, and reformulating the way it does business.”
The shares slipped 3.5 per cent at 5.52 pm on Thursday in late New York trading. The stock has fallen 3.1 per cent this year through Thursday’s close.
Nike’s global revenue rose 5 per cent to US$12.8 billion in the fiscal fourth quarter ended May 31, above Wall Street’s expectation of US$12.6 billion. Gross margin – a key gauge of profitability – was also higher than expected, while earnings per share fell a cent short of Wall Street’s average estimate.
Chief executive officer John Donahoe and Nike’s management have been selling through excess merchandise with discounts, which has weighed on margins. Inventories rose slightly in the quarter compared with the prior year period. The company attributed a gross margin decline from a year earlier in the quarter in part on “higher product input costs and elevated freight and logistics costs” along with higher discounts.
Nike’s performance improved in the Greater China region, a crucial growth market where the company appears to be regaining lost ground. Revenue in the country was US$1.8 billion for the quarter, topping analysts’ projections. BLOOMBERG
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