Nike, the world’s leading sportswear manufacturer, has exceeded Wall Street expectations for its first-quarter profit, primarily driven by higher pricing for its sneakers and apparel.
The company reported a profit of USD 1.45 billion, equivalent to 94 cents per share, surpassing analysts’ estimates of 75 cents per share. However, its total revenue for the quarter, amounting to USD 12.94 billion, fell slightly short of analysts’ projections of USD 12.98 billion.
Nike effectively managed its inventories, which decreased by 10 per cent in the quarter ending on 31 August. This reduction suggests the company successfully addressed excess product inventory ahead of the holiday season, alleviating concerns among investors that it might need to offer substantial discounts.
Furthermore, Nike anticipates a 100 basis point improvement in second-quarter gross margins, marking a positive shift after six consecutive quarters of decline. This improvement is expected to result from fewer planned markdowns and reduced freight costs.
The company maintained its annual forecasts and anticipates a slight increase in second-quarter revenue. Analysts had previously expected a 2.1 per cent rise to USD 13.59 billion.
Nike’s Chief Financial Officer, Matthew Friend, emphasised the company’s intention to capitalise on growing demand for running shoes, building on consumer momentum in the running and modern comfort segments. Nike will leverage its popular sneaker series, including Air Max 1, Infinity, and V2K.
Additionally, Nike plans to revamp its basketball shoe portfolio across the Nike and Jordan brands, focusing on style updates and introducing its new Kobe brand.
Although Nike experienced a 2 per cent decline in North America revenue, just below expectations, and a cooler growth rate of 4.8 per cent in Greater China sales, missing estimates, CEO John Donahoe expressed the company’s dedication to prioritizing the everyday runner and expanding its presence in various retail channels, including specialty running stores.
Following the earnings announcement, Nike’s share price surged by as much as 9.6 per cent in after-market trading, providing a boost after a year-to-date drop of 23 per cent in Nike’s shares.