// Revenues rise at Nike, beating analyst expectations but the business warns on profits amid the strengthening dollar and ramped-up discounts
// Revenues rose to £11.4bn despite shares slumping
Nike has warned that its profits will remain under pressure by the strong dollar and discounts aimed at cutting its stockpile of goods, despite revenues rising.
Revenues at the sportswear giant increased by 4% year on year to £11.4bn in the three months to 31 August – beating Wall Street forecasts, but those sales were less profitable amid markdowns.
Net income dropped 22% to £1.34bn from £1.70bn in the same period in 2021 due to increased transport costs and higher markdowns.
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Nike’s shares dropped over 9% in off-hours trading as it said inventories rose more than 40% compared to a year ago.
“Headwinds from foreign exchange shifted significantly in the last 90 days as the trend of US dollar strengthening has accelerated,” Nike’s finance chief Matthew Friend said.
At the Nike brand, revenues grew 4% to hit £10.7bn as it performed well in North America, Europe, the Middle East and Africa but this was partially offset by sliding sales in Greater China.
Operating costs rose 12% to £2.7bn, primarily due to wage-related expenses, strategic technology investments and increased Nike Direct costs.
“We are taking decisive action to clear excess inventory, Friend said on a call with analysts.
He said this is expected to have “a transitory impact on gross margins this fiscal year, but added that “this cost will be far outweighed by the benefit of clearing marketplace capacity.
Nike executives said its inventory in North America alone grew 65% compared to last year, reflecting a combination of late deliveries for the past two seasons and early holiday orders that are now scheduled to arrive earlier than planned.
While full-year sales are still expected to grow in a low double-digit range when adjusting for currency, real expansion is now seen in a range of low to mid-single digits.
Nike chief executive and president John Donahoe said: “Our strong start to FY23 highlights the depth and breadth of Nike’s global portfolio, as we continue to manage through volatility.
“Our competitive advantages, including the strength of our brand, deep consumer connections and pipeline of innovative product, continue to prove that our strategy is working. We expect our unrelenting focus on better serving the consumer to continue to fuel growth and create value like only Nike can.”
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