Nike Saw Strong Demand And Raised Its Revenue Forecast
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Efforts by the sneaker giant to use discounts to clear excess merchandise. Nike raised its revenue forecast and said inventory challenges are diminishing, it raised its revenue forecast and said inventory challenges are diminishing.
Consumer sentiment
Analysts have been watching Nike and other retailers for progress in reducing inventory, as many
Rising prices of food, fuel and many other goods and services weakened consumer sentiment. Shoppers buy but pay more for less goods. They also prioritize food purchases and other necessities over garden furniture and gadgets.
Retailers are running overstock and cutting prices to free up space for holiday goods. Many companies have already lowered their profit expectations for this year and are working to reduce costs as consumers pull back spending in categories such as apparel and homeware ahead of the key year-end shopping season.
Companies are trying to balance serving consumers who are willing to spend despite rising prices, while being sensitive to shoppers who need or want to be more budget conscious. As a result, retail executives and consultants are predicting the slowest November-January sales growth in years.
Nike deals better
Nike is deviating from the trend, as the company's current results show.
The company said second-quarter revenue was up 17% on a year-on-year basis and profits were about the same, a better result than analysts had expected, helping the stock gain more than 11% in trade outside working hours.
Nike has reduced inventory levels from the first quarter, but they remain elevated. The company said its inventory was worth $9.3 billion in the quarter ended Nov. 30, up 43% over the previous year.
Directors said they saw strong demand, but the company is aware that the economic woes facing consumers have not subsided.
On top of that, Nike now expects full-year revenue to grow by a percent below teens, excluding currency fluctuations, up from its September forecast of low double-digit percentage growth. The most optimistic forecast reflects what Nike has seen from consumers starting in August through the first few weeks of December.
The past
For the past two years, supply chain turmoil has held back Nike's growth as the company has struggled with stock shortages due to Covid lockdowns and factory closures in Vietnam and China. The company then sought to increase orders to both meet consumer demand and stay ahead of transit constraints.
Nike executives said the company began increasing discounts this summer, but was more aggressive in trying to get rid of items in the fall quarter.
A year ago, Nike went from having a tight inventory and being able to charge full prices for its goods to having to reduce inventory in a market where products are sold at a discount. Some items can still be sold without significant discounts. As a result, sales in North America increased by 30% compared to the previous year.
Retailers that sell Nike products, such as Dick's Sporting Goods Inc. and Foot Locker Inc., have reported better-than-expected sales in recent quarters, in part because they have had access to products that have been hard to come by for the past two years.
Nike share price
In the most recent quarter, Nike reported net income of $1.33 billion, or 85 cents a share, compared with $1.34 billion, or 83 cents a share, a year earlier. Revenue rose to $13.32 billion from $11.36 billion a year earlier.
Currently, the share price in December is even higher and exceeded 100. It seems that December will be the best month of this quarter due to the Christmas mood.
Source: wsj.com, finance.yahoo.com
