Nike Stock Fell Despite Beating Q1 Profits and Sales on the Back of the Company’s Strong Brand.

Nike Stock NYSE:NKE

Nike Stock (NYSE:NKE)

Both sales and profits for Nike (NYSE:NKE) fiscal 2023 first-quarter report were higher than the Zacks Consensus Estimate. Positive outcomes are achieved as a direct consequence of robust customer demand, a novel product pipeline, and a well-established brand. 

Nike stock dropped by more than 9% after the market closed on September 29. The slowdown in demand for Nike (NYSE:NKE) brands, including Jordan and Converse, may result from consumers’ lower discretionary spending or the increased markdowns anticipated over the Christmas season. Heavy discounts and a steadily appreciating currency are other continuing causes for worry.

Compared to the industry’s 2.5% fall over the same period, Nike stock has dropped 6.7% over the previous three months.

Summary of Q1

Nike’s (NYSE:NKE) first-quarter fiscal 2023 EPS of 93 cents was down 17.1 percent from the same quarter a year earlier, when it was reported at $1.16. But profits per share were higher than the 91 cents predicted by the Zacks Consensus Estimate.

The company behind the iconic Swoosh logo had a 4% increase in annual sales to $12.687 billion, more than the $12.27 billion predicted by analysts polled by Zacks. The expansion of the NIKE Direct business was the primary contributor to a 10% year-over-year increase in sales when adjusted for currency fluctuations.

Nike Direct sales increased by $1.1 billion, or 8% in reported terms and 14% in constant currencies. Currency-neutral, double-digit growth in North America, EMEA, and APLA helped the NIKE Direct business, which helped to somewhat offset declines in Greater China. Boosted by double-digit expansion in EMEA, NIKE Brand Digital saw its sales rise by 16% on a reported basis and 23% when adjusted for currency fluctuations.

Wholesale sales increased by 1% year over year and by 8% when adjusted for currency fluctuations. Increased stock on hand is mostly responsible for this.

Nike Stock Outlook

Management expects reported sales growth in the low to mid-single digits and currency-neutral revenue growth in the low double digits for fiscal 2023. In this forecast, currency fluctuations amount to 800 basis points.

Nike (NYSE:NKE) expects a gross margin contraction of 200-250 basis points (bps). It includes a bps loss of 150 due to significant markdowns and a higher off-price mix to liquidate elevated inventory, a bps loss of more than 100 due to increased freight and logistic costs, and a bps loss of 70 due to unfavorable currency impact. Increased investment in new transformative capabilities is expected to drive a high-single-digit rise in SG&A. Cost savings and restrained employee growth is expected to offset that.

Nike stock is anticipated that sales would increase in the low double digits during the second quarter of fiscal 2023 while facing currency headwinds of 900 basis points. The gross margin is expected to drop by 350–400 basis points yearly.

Featured Image-  Megapixl @ Hupeng

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About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.