Nike beats profit estimates, pledges to boost focus on running shoes
Reuters
Nike
The world’s largest sportswear maker also forecast a 100 basis point increase in second-quarter gross margins, following six consecutive quarters of declines, on the back of fewer planned markdowns and lower freight costs.
Nike’s inventories fell 10% in the quarter ended Aug. 31, indicating the company was successful in reducing excess product ahead of the holiday season, quelling investor fears that it would be forced to offer steep discounts.
“We will build on the consumer momentum around running and modern comfort,” Chief Financial Officer Matthew Friend said, adding the company would lean on its sneaker series such as Air Max
The company will also refresh its portfolio of basketball shoes across the Nike and Jordan
Some investors have raised concerns that Nike’s Jordan brand – a key profit-maker for the company – is “losing steam” as the value of some shoes fall on resale platforms such as StockX.
Nike has also experienced competition from other sneaker brands, including Deckers’ Hoka, On Running and French-owned sports retailer Salomon
Some of Nike’s recent running shoe releases, such as the Invincible 3 and Zoom Fly 5, were “not particularly well-received by reviewers,” according to Dylan Dittrich, head of research for analytics firm Altan Insights.
Nike CEO John Donahoe
The company maintained its annual forecasts and said it expected second-quarter revenue to be up slightly. Analysts had expected a 2.1% rise to $13.59 billion, according to LSEG data.
“Nike has showed that it has pricing power … (and) will be able to avoid really severe discounting compared to some others (in the holiday season) this year. It’s in better shape,” Morningstar senior equity analyst David Swartz said.
The company posted total revenue of $12.94 billion in the quarter, missing analysts’ estimates of $12.98 billion.
Nike reported a profit of $1.45 billion, or 94 cents per share, beating estimates of 75 cents per share.
