Nike posts slam-dunk earnings as strong demand helps counter inventory woes — and reveals a bright spot for consumer spending
Flyin’ like an eagle… Nike’s stock jumped 13% yesterday after the sneaker icon posted fire earnings results. Nike’s revenue grew 17%, to $13B+, in the quarter ending in November, as more shoppers splurged on the swoosh. Now execs expect annual revenue to grow in the “low teens,” to notch a slight improvement over last quarter’s forecast. Plus:
- On sale: Nike saw record traffic on Black Friday and Cyber Monday, with some European markets seeing shopping demand jump 75% from last year.
- Good fit: Nike’s North American sales popped 39%, helping offset lower demand (and a 3% sales dip) in China, Nike’s third-largest market.
- Overstocked: Nike’s inventories are still 43% higher than a year ago, but the company says it’s finally passed its oversupply peak. It's been a long time coming.
Checking the back room… for another pair of high-tops. Like many retailers, Nike’s had to manage overstock, supply-chain disruptions, and the threat of a consumer-buying slowdown. With retail inventories in the US up 17% from last year, Nike and its rivals have ramped up discounts to move extra merch. While promos can shrink profit margins, for the right brand it can also boost demand. Case in point: Nike’s cheaper price tags sparked record growth for its digi-membership program, while its wholesale division (think: Foot Locker, Finish Line) saw a 19% sales jump.
A step in the right direction… As the world's largest athletic-apparel company, Nike is a bellwether not only for retailers but also the economy. For rival brands, Nike’s strong earnings could be a sign that while inventories are still high, there may be greater demand for their products in the near future. For investors, it suggests that even as recession fears loom, the consumer’s still willing to splurge on the right brand (and price tag).