22 Mar Nike, Inc. Posts Double-Digit Growth Across Regions In Fiscal Q2 As EPS Beats Outlook
Nike, Inc. reported fiscal 2023 third quarter reported revenues were $12.4 billion, up 14 percent compared to the prior year and up 19 percent on a currency-neutral basis.
Nike Brand revenues were $11.8 billion, up 14 percent on a reported basis and up 19 percent on a currency-neutral basis, with double-digit growth in North America, the EMEA and APLA. Greater China grew 1 percent on a currency-neutral basis “despite a challenging December following the shift in the country’s COVID-19 policies.” On a reported basis, revenues for Greater China declined 8 percent for the period.
Converse revenues were $612 million, up 8 percent on a reported basis and up 12 percent on a currency-neutral basis, led by double-digit growth across all channels in North America, partially offset by declines in Asia.
Nike Direct sales were $5.3 billion, up 17 percent on a reported basis and up 22 percent on a currency-neutral basis. Nike Brand Digital sales increased 20 percent on a reported basis or 24 percent on a currency-neutral basis. Wholesale revenues grew 12 percent on a reported basis and 18 percent on a currency-neutral basis.
Gross margin decreased 330 basis points to 43.3 percent of sales, primarily due to higher markdowns to liquidate inventory, continued unfavorable changes in net foreign currency exchange rates, higher product input costs, and elevated freight and logistics costs partially offset by strategic pricing actions.
Selling and administrative expenses increased 15 percent to $4.0 billion. Demand creation expense was $0.9 billion, up 8 percent, primarily due to advertising and marketing. Operating overhead expenses increased 17 percent to $3.0 billion, primarily due to wage-related expenses and Nike Direct variable costs.
Net income was $1.2 billion, down 11 percent compared to the prior-year quarter, and diluted EPS declined 9 percent to 79 cents a share.
“Nike’s strong results in the third quarter offer continued proof of the success of our Consumer Direct Acceleration strategy,” said John Donahoe, president and CEO, Nike, Inc. “Fueled by compelling product innovation, deep relationships with consumers and a digital advantage that fuels brand momentum, our proven playbook allows us to navigate volatility as we create value and drive long-term growth.”
Matthew Friend, EVP/CFO, said, “Nike’s brand distinction and strong execution continue to create separation in the marketplace. We have made tremendous progress on inventory as we position Nike for sustainable and more profitable growth.”
Inventories for Nike, Inc. were $8.9 billion, up 16 percent compared to the prior-year period, primarily driven by higher product input costs and elevated freight costs, but the increase was a short moderation from the fiscal Q2 results.
Cash, equivalents and short-term investments were $10.8 billion at quarter-end, down approximately $2.7 billion from last year, as share repurchases, cash dividends and capital expenditures more than offset cash provided by operations.