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Nike (NKE) Reports Third Quarter Fiscal Year 2022 Earnings

Nike shares rose more than 5% in extended trading on Monday as the sneaker retailer’s fiscal third-quarter results beat analysts’ estimates on strong demand in North America.

But due to continued uncertainty over inflation, a foreign war and clogged supply chains, Nike is holding off on publishing a forecast for the coming year until it reports fiscal fourth quarter results.

“We’re focused on what we can control,” Chief Financial Officer Matthew Friend said on a conference call after the earnings report. “There are several new dynamics that create higher levels of volatility.”

Given its global reach, Nike is serving as a sort of leader in how other retailers deal with issues such as higher oil prices, inflation, damaged supply chains and the global unrest caused by Russia’s invasion of Ukraine.

Nike’s Chinese business is also under scrutiny. Due to a Chinese consumer boycott of Western brands, Nike’s sales plummeted early last year and the company is still in recovery mode. Nike has prioritized North America, its biggest market, over China during the pandemic when supplies were tight.

In the third quarter, Nike said sales in North America were up 9%. Sales in Greater China, the company’s third-largest market after Europe, the Middle East and Africa, fell 5% year-over-year.

In the current fiscal year, Nike reaffirmed its expectations for mid-single-digit sales growth over the previous 12-month period. According to Refinitiv data, analysts had forecast revenue growth of 5.3%.

Here are Nike’s fiscal third quarter results compared to what Wall Street expected, according to an analyst poll conducted by Refinitiv:

  • Earnings per share: 87 cents against expected 71 cents
  • Income: $10.87 billion vs. expected $10.59 billion

Nike reported net income for the three-month period ended Feb. 28 of $1.4 billion, or 87 cents per share, compared to $1.45 billion, or 90 cents per share, a year earlier. This topped earnings estimates of 71 cents per share, according to Refinitiv data.

Sales rose 5% to $10.87 billion from $10.36 billion a year earlier, beating analysts’ expectations of $10.59 billion.

The better-than-expected results proved Nike’s ability to operate in a volatile environment, CEO John Donahue said in a press release. “Market demand still far outstrips available supply,” he added.

Friend told analysts after the earnings report that Nike’s revenue growth would have been even higher over the holiday period if Nike had enough inventory in stock to meet customer demand. All of his factories in Vietnam are currently running after a production shutdown caused by the pandemic, he said.

However, transport times remain elevated, especially in North America. A friend said that Nike has extended its lead time to ensure there are enough items on the shelves this fall.

As of Feb. 28, Nike said it had $7.7 billion in inventory on its balance sheet, up 15% from the previous year, due in part to continued supply chain disruptions that have extended delivery times, it said. company. Inflated inventory levels have been partly offset by robust consumer demand, he said.

Nike’s gross margin increased slightly to 46.6% from 45.6% the previous year, driven by more full-price sales.

Nike is increasingly shifting its business from wholesalers to selling more products directly to consumers. Foot Locker, for example, recently said it would lose some Nike merchandise in the coming years. In turn, Nike is investing heavily in its website and flagship stores to boost sales.

Wholesale revenue fell 1% in the third quarter, while sales at Nike stores rose 14% year-on-year as shopping traffic “normalized”, the company said.

On Monday, Friend said Nike had finished reporting “major reversals” to all of its wholesale partners for the time being.

Nike’s digital sales in the latest quarter were up 19% year-over-year, boosted by 33% growth in North America. Donahue told analysts on the earnings call that Nike will continue to expand its footprint in the so-called digital metaverse through a collaboration with Roblox, as well as the acquisition of virtual sneaker marker RTFKT.

As of Monday’s market close, Nike shares are down 22% this year.

Find Nike’s Full Earnings Press Release here.


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