Nike headquarters sooner profits cut as lower margins reach marks apparel firm

July 4, 2023: On Thursday, Nike cut on revenues for the first time in three years, as the retailer said lower margins considered on profits during its fiscal fourth quarter.

Shares dropped over 2% in premarket trading. The stock has dropped about 3% this year.

The company’s stated net income for the consecutive three-month period that concluded May 31 was $1.03 billion, or 66 cents for each share, compared with $1.44 billion, or 90 cents for each share, a year earlier. Earnings decreased below Wall Street’s expectations, a rare miss for the retailer.

Sales rose to $12.83 billion, up about 5% from $12.23 billion a year earlier and ahead of Wall Street’s estimates. The company beat revenue estimates for the seventh quarter, as sales surged in China after the country rolled back pandemic restrictions.

For its full fiscal year, Nike’s revenue was $51.2 billion, up 10% compared to the prior year. It beat analysts’ expectations of $50.99 billion, according to Refinitiv.

However, profits for the entire year also came in below expectations. The athletic apparel retailer reported earnings per share of $3.23, just short of the $3.24 Wall Street had anticipated, according to Refinitiv. Nike’s net income for the year was $5.1 billion, down 16% compared to the prior year.

The company offered muted guidance for the year and quarter ahead as it watches the broader economy, consumer behavior, and retail trends.

For 2024, the retailer expects revenue to grow by mid-single digits. Analysts had expected year-over-year growth of 6.3%, according to Refinitiv. Given the macro environment, Nike handles its forecast is a “great number,” Chief Financial Officer Matthew Friend said during a call with investors.

The company anticipates gross margins to enhance between 1.4 and 1.6 percentage points for the year.

In the quarter ahead, it forecasts earnings to be flat to up low single digits. Analysts had predicted sales growth of 5.8%, according to Refinitiv. It also anticipates gross margins in the quarter will be down 0.5 to 0.75 share points.