Nike’s efforts to eliminate excess inventory have hit profit margins

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Shares of Dow component Nike (NKE) tumble after the company released its latest earnings report.

The company beat analysts’ estimates for earnings and sales, but its profit margins were hit by markdowns to eliminate excess inventory. Higher freight costs and a stronger dollar also weighed on Nike’s earnings.

The sports equipment giant reported net income of $1.5 billion or 93 cents per share in the first quarter. Analysts had expected earnings of 92 centers per share. Sales were $12.7 billion, versus analyst estimates of $12.2 billion.

Nike’s gross margins fell to 44.3% from 46.5% a year ago. Nike executives said the decline was primarily in North America as the company had to liquidate excess inventory through its direct-to-consumer unit, Nike Direct. Nike’s inventory was $9.7 billion, a 44% increase from the year-ago period due to what executives described as supply chain issues.

Total Nike sales in Greater China fell 16% to around $1.7 billion from $2 billion a year ago as sales were impacted by COVID-19 lockdowns. Total sales in North America rose 13% to $5.5 billion from $4.9 billion a year ago as US demand remained resilient despite rising inflation.

Shares of Nike fell more than 12% in early trading on Friday, leading to losses on the Dow Jones Industrial Average. They have lost nearly half their value so far this year.


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