New York (AFP) - Nike reported lower quarterly profits Thursday on increased logistics spending and a hit from product markdowns, as it pivots in a fast-changing consumer market challenged by inflation.
The sports giant topped analyst estimates for both earnings per share and revenues, but shares fell sharply as it faced questions over excess inventory in North America and signaled the strengthening dollar would dent results.
Nike expects a $4 billion hit from the stronger dollar in its current fiscal year, said Chief Financial Officer Matthew Friend on a conference call over its fiscal 2023 first quarter results.
Profit for the quarter ending August 31 was $1.5 billion, down 22 percent but translating into earnings per share that exceeded expectations.Revenues rose four percent to $12.7 billion.
While sales once again fell in Greater China, a market hard hit by Covid-19 restrictions, Nike notched higher sales in its other three regions, including North America, where revenues jumped 13 percent.
But the company is facing a much more promotional environment in its home market, where other retailers are offering deals as consumers respond to costlier gasoline, groceries and other household items.
At the same time, Nike has seen a 65 percent jump in inventories in North America, an increase that reflects an uptick in early orders from retailers concerned about supply chain delays, as well as improving delivery times.
Friend said Nike has continued to see strong consumer demand for choice products, but that it is working to offload a glut of older items that have generated less interest.
"We're focused on trying to clear through that late-season apparel inventory," Friend told analysts on a conference call.
Neil Saunders, managing director of consultancy GlobalData, said Nike's results were "relatively strong," but warned it was not immune to macro challenges.
"At present, consumer sentiment and spending are holding up relatively well and we believe this bodes well for the upcoming quarter.However, as we move into 2023 and beyond the demand picture could soften," Saunders said.
"Nike is in a better position than most brands, but it may find it harder to punch out such good numbers as it moves into the back end of its fiscal year."
Shares fell 10.1 percent to $85.68 in after-hours trading.
