For decades, Nike has had only one mantra: set records! Did he leave it in the locker room? Abandoned the game? Stopped dead in its tracks, the American sports equipment manufacturer published, as we feared, results for the first quarter of 2023 (June-August) confirming the contraction of its margins. For a turnover of 12.69 billion dollars, up 3.6%, the gross margin, which is one of the most followed indicators, eroded by 2.2 points, to 44, 3%, compared to 46.5% as of August 31, 2021. Net profit fell 22% to $1.5 billion, or 93 cents per share, from $1.87 billion and 1.18 dollar per share a year earlier.
The stop-go game, stemming from the zero Covid policy of an intractable Beijing, has pushed the Beaverton giant, like its rivals, to secure its supplies, even if it means exaggeratedly inflating its stocks. Over one year, they increased by 44%, to approach 10 billion dollars.
“New degree of complexity”
” We are facing a new level of complexity “, acknowledged Matthew Friend, Nike’s chief financial officer during a conference call with financial investors. ” We were late receiving products for the Spring, Summer and Fall seasons due to disruptions in North America, then decided to pre-order other collections, so multiple seasons of items are hitting the market at the same time. As some of this stock is irrelevant, we have decided to liquidate it more aggressively so that we can bring consumers the newest items in the right places.. »
In summary, the Beaverton giant will continue to put its foot on the sales and promotions accelerator to lighten its stock. According to him, his competitors are doing the same. But will customers respond when, for many of them, the question of the erosion of purchasing power becomes central? A difficulty that never comes alone, the evolution of the parity between the euro and the dollar penalizes the American equipment manufacturer, of the order of 400 basis points on the prospects for sales growth over the financial year, according to its forecasts, while sales in China fell again, by 16% over the quarter, when they rose in all the other geographical areas, including North America (+13%).
This slowdown, which is added to the breakthrough of Chinese equipment manufacturers Li Ning and Anta Sports on their own territory, will it force Nike to review its tactics of play in China? This market is key for the American, as for Adidas. Both are redoubling their efforts to seduce the urban Chinese, well-to-do and fond of leisure and sport. ” As we mentioned last quarter, we are taking a cautious near-term approach in Greater China, given the ongoing risks of disruption from Covid.replied Matthew Friend. However, our brand and business momentum gives us growing confidence that Nike’s unique value proposition will fuel long-term growth in Greater China.. »
On the stock market, investors sanction these announcements. The course of Nike collapses by 11% on Wall Street this Friday at the start of the session, which brings to 50% its fall since the 1er January.
PC