NKE stock was trading at $88.91 as of 10:51 AM EDT.
On Wednesday, Nike (NYSE:NKE) received a second rating cut as worries about the holiday season and the first half of 2023 grow. Erste Group, an Austrian company, downgraded Nike’s (NKE) recommendation from Buy to Hold.
Nike (NYSE:NKE) has reported an increased inventory of its products, according to analyst Stephan Lingnau. He added that NKE’s operating income has decreased as a result of growing expenses. Lingau cautioned that the eroding profitability was unlikely to rebound rapidly because real consumer incomes were still declining.
There are 21 buy ratings for Nike (NKE), 13 neutral-equivalent ratings, and no sell-equivalent ratings. In the opening minutes of trading on Wednesday, Nike (NKE) lost 0.50%.
The reasoning behind selling Nike (NYSE:NKE) stock is simple enough: the company has too much inventory, so shareholders should do so before markdowns have the usual negative impact on margins and profitability. But as many seasoned investors will confirm, a story like this occasionally takes on a life of its own and ends up causing more harm than is necessary. How serious are Nike’s inventory problems?
Nike Stock Fell Despite Beating Q1 Profits And Sales On The Back Of The Company’s Strong Brand.
Similar flaw, different cause
If you are reading this, Nike’s stock dropped 12.8% on September 30 and is currently down more than 10%, capping off a more than 50% decline from its peak in November 2021.
The price drop was a sales slowdown in China, which will be reflected in other markets.
However, the most recent portion of the sell-off happened when the company’s fiscal 2023 first-quarter data was released, which was released last week and appeared to indicate artificially inflated inventory counts. Nike (NYSE:NKE) had roughly $9.7 billion in merchandise on its books at the end of the first quarter of its fiscal 2023, a significant increase from the $6.7 billion it reported the year prior.
For context, the company’s most recent inventory count represents 76% of the revenue from the same quarter, giving it the largest inventory-to-sales ratio it has experienced in a very, very long time.
Featured Image – Unsplash © takeshi2
Author Jowi Kwasu 
