Nike’s Friday earnings release so beautifully captured the dynamics of the forthcoming global recession that it is worth a look. Goldman wraps it:
NKE reported 1Q23 sales of $12,687 mn, better than FactSet consensus estimates of $12,278 mn. EPS also came in above consensus at $0.93 vs. $0.92. Despite these better than expected top and bottom-line results, gross margin came in lower than anticipated, at 44.3% vs. the Street’s 45.3%, as freight/logistics headwinds, markdown pressures, and FX weighed on profitability. Though Nike continues to expect currency-neutral sales growth of +low double-digits for fiscal 2023, the company lowered its gross margin forecast by -200 bps at the midpoint with the lower guide partially due to the need to aggressively discount mis-timed inventory as a result of supply chain challenges. Management now sees sales dollar growth of +low to mid single digits for the year (vs. +6% to 8% previously) due to a stronger dollar. Nike’s stock fell ~9% post the release in after hours trading. Despite Nike’s explanation around inventory (2/3rds of inventory is currently in transit), we think investors are concerned that this could be a bigger issue for the company over the next several quarters, especially if the macro environment deteriorates.
Which it will as something in markets breaks and consumption stalls. The rest of this post writes itself:
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