Nike sees sales soar, but stocks sink margins

Nike recorded an impressive 14 % sales growth in the past quarter, even though large stocks are eating away at its margins. The trainer giant says 2023 will be “volatile”, but that it is prepared for that.

Ballast from previous years

Nike is (again) exceeding expectations and is further increasing its lead over rival Adidas. In the quarter ending at the end of February, the sports brand posted revenues of 12.4 billion dollars (11 billion euros), 14 % more than a year earlier. There was double-digit growth in all markets, except China, where Covid-19 still caused lockdowns. Only in January did key Chinese sales finally begin to pick up.

The trainer label does struggle with excess stocks: due to supply chain disruptions and erratic demand in recent years, inventory costs rose 16 %. Nevertheless, inventories are shrinking faster than expected and CEO John Donahoe is increasingly confident that Nike will end the financial year with healthy inventory levels, CNBC reports.

Nothing new under the sun

Nike’s gross margin consequently fell 3.3 percentage points to 43.3 % as the brand had to give more discounts to clear inventories. Net profit was 1.2 billion dollars, down from 1.4 billion a year earlier.

For the coming quarter, Nike is going for a cautious approach, expecting no to low single-digit revenue growth. CFO Matthew Friend is not worried about that: “We have managed through cycles like this before and we will be well prepared for the volatility that is in front of us”, he says. For the full financial year, the sportswear manufacturer is counting on high single-digit revenue growth, while gross margins are expected to fall by 2.5 percentage points.