Nike continues to navigate a turbulent retail environment, even as demand for the company’s products continues.
The Beaverton, Oregon-based athletic footwear, apparel and accessories group — which includes the Nike, Jordan and Converse brands — revealed quarterly earnings Tuesday after the market closed, improving on top-line sales but falling flat on profits as inflation continues to push prices higher and leave a surplus of product.
Still, investors were satisfied with the results: Nike’s shares rose more than 11 percent in after-hours trading to $115.04.
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“Nike’s results this quarter are a testament to our deep connection with consumers,” John Donahoe, the company’s president and chief executive officer, said in a statement. “Our growth was broad-based and was driven by our expanding digital leadership and brand strength. These results give us confidence in delivering the year as our competitive advantages continue to fuel our momentum.”
Total revenues for the three-month period ending Nov. 30, increased 17 percent to $13.3 billion, compared with $11.3 billion during last year’s second quarter. The company’s direct sales rose 16 percent to $5.4 billion, while the Nike brand’s digital sales grew 25 percent on a reported basis. Revenues in the wholesale segment increased 19 percent.
By brand, revenues at Nike increased 18 percent, year-over-year, to $12.7 billion, up from $10.8 billion a year ago. The company said there was strong growth across all geographies and channels. Total sales at Converse rose 5 percent to $586 million, up from $557 million last year.
Revenues in all categories — including footwear, apparel and accessories — grew across all geographies during the quarter, with the exception of apparel and equipment in mainland China, which were down 24 percent and 39 percent, respectively, for the quarter. Double-digit growth in North America (as high as an increase of 39 percent, year-over-year, for footwear) helped offset declines in Asia.
But additional markdowns to help clear excess inventory, particularly in North America, cut into profits. So did unfavorable exchange rates and elevated freight, logistics and production costs. In addition, excess inventory was costly. Nike’s inventories rose 43 percent during the quarter, year-over-year, to $9.3 billion. The company credited an increase in units lapping from last year’s supply chain disruption for the surplus of goods, as well as rising input costs. In addition, overhead costs increased 10 percent to $3 billion, driven by investments in technology and wage-related expenses.
The company’s profits were roughly flat at $1.331 billion, compared with $1.337 billion a year ago, as a result. Diluted earnings per share rose 2 percent to $0.85, compared with $0.83 a share last year.
Still, Nike executives remain optimistic for the company’s future.
“Consumer demand for Nike’s portfolio of brands continues to drive strong business momentum in a dynamic environment,” said Matthew Friend, executive vice president and chief financial officer. “We remain focused on what we can control and we are on track to deliver on our operational and financial goals, setting the foundation for sustainable, profitable growth.”
Nike ended the quarter with about $6.5 billion in cash and cash equivalents and $8.9 billion in long-term debt.
Also on Tuesday, documents from a 2018 gender discrimination lawsuit against Nike were unsealed, revealing statements from female employees who alleged there was a culture of sexism and gender discrimination at Nike. The suit is ongoing.
Representatives at Nike did not respond to requests for comment Tuesday regarding the new details that surfaced, as well as whether any actions have been taken in response to the new reports.
Shares of Nike, which closed up 0.16 percent to $103.21 Tuesday, are down more than 38 percent, year-over-year.