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By Deborah Mary Sophia and Katherine Masters
(Reuters) -Nike topped Wall Avenue estimates for first-quarter revenue on Thursday as increased costs of its sneakers and attire helped offset a success from waning demand and chronic value pressures, sending its shares up about 8% in prolonged buying and selling.
The world’s largest sportswear maker additionally forecast a 100 foundation level improve in second-quarter gross margins, following six consecutive quarters of declines, on the again of fewer deliberate markdowns and decrease freight prices.
Nike’s inventories fell 10% within the quarter ended Aug. 31, indicating the corporate was profitable in decreasing extra product forward of the vacation season, quelling investor fears that it could be pressured to supply steep reductions.
“We’ll construct on the buyer momentum round working and fashionable consolation,” Chief Monetary Officer Matthew Good friend mentioned, including the corporate would lean on its sneaker sequence resembling Air Max 1, Infinity and V2K to money in on the rising demand for trainers.
The corporate may also refresh its portfolio of basketball sneakers throughout the Nike and Jordan manufacturers when it comes to fashion, in addition to give attention to its new Kobe model, Good friend added.
Some buyers have raised issues that Nike’s Jordan model – a key profit-maker for the corporate – is “dropping steam” as the worth of some sneakers fall on resale platforms resembling StockX.
Nike has additionally skilled competitors from different sneaker manufacturers, together with Deckers’ Hoka, On Working and French-owned sports activities retailer Salomon, as consumers gravitate towards “efficiency” sneakers.
A few of Nike’s current working shoe releases, such because the Invincible 3 and Zoom Fly 5, had been “not significantly well-received by reviewers,” in accordance with Dylan Dittrich, head of analysis for analytics agency Altan Insights.
Nike CEO John Donahoe mentioned the corporate would flip its consideration to “prioritizing the on a regular basis runner” and connecting with consumers in additional channels, together with specialty working shops.
The corporate maintained its annual forecasts and mentioned it anticipated second-quarter income to be up barely. Analysts had anticipated a 2.1% rise to $13.59 billion, in accordance with LSEG information.
“Nike has confirmed that it has pricing energy … (and) will have the ability to keep away from actually extreme discounting in comparison with some others (within the vacation season) this yr. It is in higher form,” Morningstar senior fairness analyst David Swartz mentioned.
The corporate posted whole income of $12.94 billion within the quarter, lacking analysts’ estimates of $12.98 billion.
Nike reported a revenue of $1.45 billion, or 94 cents per share, beating estimates of 75 cents per share.
(Reporting by Deborah Sophia in Bengaluru and Katherine Masters in New York; Modifying by Shounak Dasgupta and Jamie Freed)