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Earnings Results: Nike destroys earnings and sales expectations, stock gains

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Nike Inc.’s stock rose nearly 8% in extended trading Tuesday after the sporting-goods retailer reported early holiday earnings and sales are tracking solidly higher than Wall Street expected, though inventories remain high and a forecast could still loom.

Nike
NKE,
+0.16%

reported fiscal second-quarter net earnings of $1.33 billion, or 85 cents a share, compared with net earnings of 83 cents a share in the year-ago quarter. Revenue was $13.32 billion, up 17% from $11.36 billion a year ago for the sneaker maker in the quarter, which ended Nov. 30.

Analysts surveyed by FactSet had expected on average net earnings of 64 cents a share on revenue of $12.58 billion.

Nike executives did not provide a third-quarter forecast in their announcement, though executives did suggest that there would be no negative change to their annual forecast. Chief Executive John Donahoe said “These results give us confidence in delivering the year as our competitive advantages continue to fuel our momentum” in a statement announcing the results, while Chief Financial Officer Matthew Friend said “We are on track to deliver on our operational and financial goals.”

Nike announced the results amid a daunting confluence of slackening consumer spending, foreign-exchange headwinds and an elevated promotional environment, Jefferies says in a research note. In September, Nike shares tumbled after executives said markdowns on the retailer’s products would squeeze margins, and they expected clothing competitors to keep slicing prices through at least the end of the year.

Read more: Inventory concerns are pounding Nike’s stock

With consumers buying fewer clothes, Nike and other retailers have shouldered swelling inventories, though executives at Nike insist the level of excess goods likely peaked in North America this summer. In Tuesday’s report, Nike reported inventories of $9.3 billion, up 43% from the same quarter a year ago. Analysts on average were projecting inventories of $8.83 billion, according to FactSet.

“The market is focused on progress to resolution of FY23 inventory issues as a set up to a strong margin recovery” in fiscal 2024, Stifel analysts said in a note last week.

Shares of Nike have declined 38% this year, while the broader S&P 500 index
SPX,
+0.10%

is down 20%.

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