Following Nike’s latest earning report, the Shares of Dow component Nike (NKE) decreased. Nike shares jumped due to the higher costs and inventories affecting it. The company’s profit margins slide from markdowns in order to manage the excessive inventory. But the problem is not that simple, Nike also encounters higher freight costs plus a stronger dollar weighing its profits. Although a strong dollar could be good and bad, it is still something to be concerned about in the company.
The first reported net income from the athletic gear giant Nike is $1.5bn or 93 cents a share. This is quite different from the analyst’s overview. The analysts expected that the company’s earnings should be 92 center per share. Meanwhile, based on the report, the sales are at $12.7bn different from the analysts estimation which is $12.2bn. In addition, the company’s gross margins jumped to 44.3% compared to 46.5% a year ago. The company’s executives argued that the decrease happened majorly in North America. This is because in that bloc, the company must liquidate inventories excess through the direct-to-consumer sales unit. The direct-to-consumer sales untit is Nike Direct.
Furthermore, Nike’s inventories stand at $9.7bn, this is a 44% increase from the previous year due to the supply chain issues. The total of Nike sales in Greater China fell 16% to around $1.7bn. This is with the comparison of a year ago which was $2bn. Last year, the company encountered problems due to the impact of COVID-19 lockdowns. Although the demand is resilient after the rise of inflation the company made an increase by 13% a year ago. The increase covers $5.5bn compared to $2.9bn. Nike’s shares fell at 12% impacting the losses on the Dow Jones Industrial Average.