Tuesday's Market Minute: Nike (NKE) Earnings Breakdown

Nike NKE is lower before the open this morning after its 4Q earnings report. EPS of $0.90 and revenue of $12.2 billion both beat street expectations, and Nike also announced a four-year, $18 billion stock repurchase program. However, North America and China's revenue in the quarter were down 5% and 19% respectively. The fall in China could be attributed to lockdowns, as Nike executives said there was an improvement from April through June as some lockdowns lifted, and there was strong overall consumer demand.

A group of analysts cut their price targets on Nike this morning, some mentioning that fiscal 2023 guidance was lighter than expected, and others concerned about margins. Several cited concerns about China, both for supply chain issues and worries that the Chinese consumer would begin to expect markdowns as Nike pushes sales there.

As inflation continues apace and consumers tighten their wallets, could Nike’s direct-to-consumer push work against it? Though brand loyalty to Nike is strong, consumers could focus more on price comparisons and shopping at places with more options, just as Nike is pulling away from other retail distributors. Supply chain issues also weigh on the company as the pandemic continues. Overall, it seems like the Street is tempering its expectations for the athletic company.

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