Nike reported slightly lower earnings and revenue for the fiscal fourth quarter on Monday, amid significant China headwinds. The Dow Jones athletic shoe and apparel giant topped analyst views.
But Nike stock plunged Tuesday, after the company said a strong dollar will take a toll.
Nike Earnings
Nike earnings fell 3% vs. a year earlier to 90 cents per share while revenue dipped 1% to $12.2 billion. Nike earnings also dropped 3% in fiscal Q3, but it was the first sales decline in seven quarters.
Wall Street had forecast Nike earnings per share of 81 cents on $12.07 billion sales.
"In this dynamic environment, NIKE's unrivaled strengths continue to fuel our momentum," CFO Matt Friend said in the news release. "Two years into executing our Consumer Direct Acceleration, we are better positioned than ever to drive long-term growth while serving consumers directly at scale."
Nike's revenue from the Chinese market dropped 19% vs. a year earlier to $1.6 billion as pandemic lockdowns forced store and factory closures.
Those losses were partially offset by 20% gains in Europe, Middle East and Africa divisions. China accounts for 17% of Nike sales, trailing only the U.S. at 33%. In Q4, North American sales fell 5% to $5.11 billion.
Outlook
On the earnings call, Nike said it expects fiscal 2023 revenue to rise in the low double digits on a currency-neutral basis. But real dollar revenue in the current Q1 will only be flat to slightly up, slightly below analyst targets.
The U.S. dollar has surged vs. other major currencies in recent months to longtime highs.
Fellow Dow component Microsoft warned a few weeks ago on June-quarter earnings, citing foreign exchange swings.
Nike also sees flat to lower margins in Q1, amid higher freight costs.
NKE Stock
NKE stock fell 7% to 102.78 on Tuesday. Nike stock is below a fast-falling 50-day line and not far above a 22-month low of 103.46 on May 26. NKE stock has plunged from a record 179.10 on May 5.
Shares fell despite Nike announcing a new, four-year $18 billion NKE stock buyback plan. It replaces a $15 billion buyback program that had roughly $6.3 billion remaining.
Nike Earnings Details
For the quarter, NKE incurred a $150 million charge from exiting its business in Russia. It's also transitioning its businesses in Argentina, Chile and Uruguay to distribution models to remedy its supply chain issues.
Last summer, pandemic shutdowns forced Nike to suspend its operations in Vietnam, where it has 80% of its footwear and half its apparel made. NKE resumed full production there in November.
NKE had $8.4 million of inventory on its balance sheet for Q4, up 23% from the prior year's same period. The company said some two-thirds of that inventory is in transit. Nike says it has been having trouble meeting demand due to all the supply disruptions. Gross margin for the company fell 80 basis points to 45%, primarily due to higher inventories in China and increased logistics costs.
