Nike Reports First Earnings Miss in Three Years

(Reuters) Nike forecast first-quarter revenue below Wall Street expectations on Thursday as cost-conscious consumers in North America cut back on sneaker and sports apparel purchases overshadowing a strong recovery in China.

In North America, the company's biggest market, still-high inflation has led to consumers buying essential goods and reducing discretionary spending.

Sales rose 5% in the region in the fourth quarter, the slowest in four quarters as U.S. wholesalers became more prudent in placing newer orders. In Europe, Middle East and Africa sales increased 3%.

The company's shares were last down about 4% in extended hours in choppy trading.
Next year, the environment is going to continue to be promotional which puts pressure on wholesale partners in terms of how they manage through the first half of the year, CEO John Donahoe said on an earnings call.

Peer Under Armour forecast annual sales and profit below Wall Street estimates in May due to waning demand and higher discounts.

Nike's gross margin fell 140 basis points to 43.6% in the reported quarter on efforts to clear excess inventory through more promotions and discounts at a time when the industry is being squeezed by higher supply chain, input and labor costs.

"Nike's Q4 23 earnings report makes it abundantly clear that the US economy is, in fact, facing considerable headwinds — which is a bit of a cold blow after this morning's very positive GDP figures. I think the main takeaway here is that investors should take this threat seriously going forward," said Thomas Monteiro, senior analyst at Investing.com.

"Based on these figures, I anticipate additional analyst target reductions," Monteiro added. "Nike's Achilles Heel lies in its diminishing gross margin, primarily attributable to mounting inventories and escalating freight expenses. Considering the present macroeconomic landscape, it seems likely that these challenges will persist throughout the year, leading to a halt in overall sales."