5 months ago • 2 mins
What’s going on here?
Nike's fourth-quarter earnings suggested the firm’s getting its mojo back.
What does this mean?
Nike’s had a rocky year or so dealing with unsold inventory, sky-high shipping costs, and sluggish Chinese sales. But things are looking up now: while the firm’s still wrestling with leftover stock and stubborn costs under the surface, strong sales growth is pulling it along. With a solid 5% increase overall, a 16% jump in China, and a 15% leap in its vital direct-to-consumer sector, it looks like Nike’s brand is still fit as a fiddle. So while the slightly lower-than-expected forecasts might have some investors faltering, Nike’s got a clear message: inventory and cost headaches are temporary hiccups, but strong sales are here to stay.
Why should I care?
Zooming in: Direct dimes.
Nike's been sprinting away from its wholesale buddies for a while now, and making a beeline for customers online and in its own stores instead. So far, that strategy has swollen direct-to-consumer sales to more than half of Nike's total pie – and with 15% growth in direct sales last quarter, that slice only seems set to grow. And that’s a good thing: see, cutting out the middleman means that Nike pockets more profit – a surefire way to fatten margins over time.
Zooming out: Don’t speak too soon.
In the post-earnings conference call, Nike's CEO declared that the Chinese consumer is back and ready to spend. But that might come as news to the country’s government. After all, years of lockdowns have shaken consumer confidence, and spending’s still in a slump. Plus, fresh data suggests that factory activity took a hit for the third straight month in June. But hey – maybe the mad dash for Air Jordans does mean the Chinese consumer's still got game.
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