Nike Q4 Beats Analyst Expectations Despite Russia Exit, China Pressures

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Shares for Nike, Inc. were up slightly in after-hours trading on Monday after the company beat expectations on earnings and revenue for its fiscal fourth quarter.

Revenues in Q4 were down 1% to $12.2 billion compared to the prior year, with net income down 5% to $1.4 billion, or 91 cents per share. The Beaverton, Ore.-based company attributed approximately $150 million in expenses in the quarter associated with closing its Russian operations, and the transition of its businesses in Argentina, Chile and Uruguay to strategic distributor models.

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The athletic giant beat analyst expectations on both earnings and revenue. Market watchers had been expected earnings of 81 cents, and revenue of about $12.07 billion.

By business unit, revenues for the Nike brand in the fourth quarter were $11.7 billion, down 1%. Converse was also down 1% to $593 million. Nike also said in a statement that its gross margin in Q4 decreased 80 basis points to 45.0%, primarily due to higher inventory obsolescence reserves in Greater China and elevated freight and logistics costs.

A bright spot came in Q4 via Nike Direct. The business unit reported revenues were up 7% led by 25% growth in EMEA, 43% growth in APLA and 5% growth in North America, partially offset by a decline in Greater China.

Still, Nike posted gains for the full year, seeing revenues increase 5% to $46.7 billion with net income increasing 6% to $6.0 billion compared to the prior year, beating analysts expectations.

By business unit, revenues for the Nike brand for the full year were $44.4 billion, up 5% on a reported basis, while revenues for Nike Direct were $18.7 billion, up 14% on a reported basis. Revenues for Converse were $2.3 billion, up 6% on a reported basis.

“Nike’s results this fiscal year are a testament to the unmatched strength of our brands and our deep connection with consumers,” John Donahoe, president and CEO of Nike, Inc., said in a statement. “Our competitive advantages, including our pipeline of innovative product and expanding digital leadership, prove that our strategy is working as we create value through our relentless drive to serve the future of sport.”

Matt Friend, EVP and CFO at Nike, Inc., added: “Two years into executing our Consumer Direct Acceleration, we are better positioned than ever to drive long-term growth while serving consumers directly at scale.”

These results may soften the blow, as some analysts warned investors last week to brace themselves for “less-than-stellar results.”

“In spite of ongoing strong demand for Nike product, Covid related lockdowns in China, increasing foreign exchange headwinds due to the strong U.S. dollar, and ongoing supply chain logistic problems will pressure both sales and margins in Q4 and the full-year of 2023,” wrote Williams Trading analyst Sam Poser in a note to investors last week. “Nike remains one of the best brands anywhere, but the Nike stock does not share, and should not share, that elevated status.”

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