Nike shares were up more than 5% during extended trading Monday as the sneaker retailer’s fiscal third-quarter results beat analysts’ estimates due to strong demand in North America.

But with uncertainties surrounding inflation, a war abroad and congested supply chains, Nike is waiting to release its outlook for the year ahead until it reports its fiscal fourth quarter results.

“We’re focused on what we can control,” Chief Financial Officer Matthew Friend said on a post-profit conference call. “There are several new dynamics that are creating higher levels of volatility.”

Given its global reach, Nike acts as a sort of whistleblower of how other retailers are coping with challenges such as increased oil prices, inflation, crippled supply chains and global turmoil resulting from the Russian invasion of Ukraine.

Nike’s Chinese company is also watching. A boycott by Chinese consumers of Western brands caused Nike’s sales to take a hit early last year, and it’s still in recovery mode. Nike has prioritized North America, the largest market, over China during the pandemic when supplies were tight.

In the third quarter, Nike said sales in North America were up 9%. Sales in Greater China, the company’s third-largest market behind the Europe, Middle East and Africa segment, were down 5% year-on-year.

For the current fiscal year, Nike reiterated its expectation that sales would grow at mid-single digits from the prior 12-month period. Analysts had forecast a 5.3% increase in sales, according to data from Refinitiv.

Here’s how Nike fared in its fiscal third quarter compared to what Wall Street expected, based on an analyst survey by Refinitiv:

Earnings per share: 87 cents vs. 71 cents expectedRevenue: $10.87 billion vs. $10.59 billion expected

Nike reported net income for the three-month period ended Feb. 28 of $1.4 billion, or 87 cents per share, compared to $1.45 billion, or 90 cents per share, a year earlier. That surpassed earnings estimates at 71 cents a share, according to data from Refinitiv.

Revenue rose 5% to $10.87 billion from $10.36 billion a year earlier, surpassing analyst expectations of $10.59 billion.

The better-than-expected results prove Nike’s ability to operate in a volatile environment, CEO John Donahoe said in a press release. “Market demand continues to significantly exceed available inventory supply,” he added.

Friend told analysts that Nike’s sales growth over the holiday season would have been even stronger if Nike had had enough merchandise on hand to meet shoppers’ demand. All of its factories in Vietnam are now operational, he said, following pandemic-induced shutdowns that brought production to a halt.

However, transport times remain high, especially in North America. Friend said Nike has pushed its purchase timelines to have enough products on shelves for later this fall.

On Feb. 28, Nike said inventories on its balance sheet totaled $7.7 billion, up 15% from the same period last year, in part due to ongoing supply chain disruptions that extend transit times, the company said. Inflated inventory levels were partially offset by robust consumer demand, it said.

Nike gross margins increased slightly to 46.6%, compared to 45.6% last year, driven by increased sales at full price.

Nike has increasingly shifted its business from wholesalers to more goods direct to consumers. For example, Foot Locker recently said it would lose a percentage of Nike merchandise in the coming years. Nike, in turn, has invested heavily in its website and flagship stores to win sales.

To be on the safe side, Donahoe said on Monday night that Foot Locker remains a “big and important partner” for Nike. Going forward, Foot Locker will play a significant role in Nike’s business as a wholesaler with a focus on basketball and kids, he said.

At this point, Nike noted that it has finished communicating the “big accounts” to all of its wholesale partners.

Nike’s third-quarter wholesale revenues were down 1%, while retail sales were up 14% year over year as retail traffic “normalized,” the company said.

Nike’s digital sales in the last quarter were up 19% year-over-year, driven by 33% growth in North America. Donahoe told analysts on the earnings call that Nike will continue to expand its presence in the so-called digital metaverse, through its partnership with Roblox and its acquisition of virtual sneaker marker RTFKT.

As of Monday’s market close, Nike shares are down 22% this year.

Find the full press release on Nike’s earnings here.


This post Nike (NKE) Reports Q3 2022 Fiscal Results was original published at “https://www.cnbc.com/2022/03/21/nike-nke-reports-fiscal-q3-2022-earnings.html”

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