“Nike’s performance in the second quarter shows that the brand remains strong, that margins are intact and that global demand is healthy,” said Randal Konik, Jefferies analyst, who was the most optimistic and raised its price target by $25, to $140.
In September, Nike said its inventories they had shot up 44% to almost US$10 billion at the end of the first quarter, and warned of weak margins, stoking fears across the industry that consumers were cutting discretionary spending due to rising inflation.
“We think the inventory spike is behind us as the measures we’re taking in the market are working,” Nike Chief Executive John Donahoe said in a post-earnings conference call on Tuesday.
Although Nike’s quarterly inventory was down about 3% from the previous quarter, margins fell 300 basis points on increased promotions and discounts. Even so, the decline was smaller than expected, according to analysts, thanks also to the launch of higher-priced products such as the LeBron 20 and Nike Mercurial shoes.
“Nike offered promotions, but at the same time pushed new products without promotions,” said Jessica Ramirez, an analyst at Jane Hali & Associates.
Nike’s sales in North America rose 30%, while in China – where business was recovering from lockdowns – they fell just 3%, after a 16% plunge in the first quarter.
The company’s shares, which have fallen about 38% this year, were at $114.82 in pre-session trading, while European counterparts Adidas and Puma were also up about 7% and 9%, respectively.
Source: Ambito
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