Nike
However, the company continues to be plagued by the same issues as other retailers. Inventories are about 30% higher than normal due to weakening demand and the "reverse bullwhip effect" which is resulting in excess inventories for all types of retailers. In essence, the backup at ports markedly improved which is a positive in the long-term but a short-term headwind. Another challenge for the company is the deteriorating economic outlook which is impacting all consumer-dependent companies.
Overall, Nike's shares are down 38% YTD. Historically, pullbacks of these magnitudes have proven to be good entry points into Nike stock. Even though, it's likely that economic conditions are likely to continue deteriorating until the Fed pivots on its hawkish stance.
Inside the Numbers
In its fiscal Q4, Nike reported $0.90 per share in earnings which was a slight decrease from last year's $0.93 in earnings per share. However, the company did top analysts' estimates of $0.81 per share. Revenue also topped expectations at $12.2 billion vs $12.1 billion and was down 1% from last year.
Shares initially rallied as it approved a new buyback program of $18 billion over 4 years to take the place of its previous $15 billion share repurchase that will run to the end of fiscal 2023.
Nike's costs rose about 8% due to higher sales and administrative expenses and due to investments in online and direct sales channels. It continues to see headwinds due to the economy, higher costs, and longer transport times, although the latter 2 issues are improving at a healthy pace.
From a contrarian sense, it is a good sign for the economy that sales were only down 1%, an indication that we are not in a recession at the moment. Next quarter, it sees revenues from flat to slightly higher with the major variable being China's economy and handling of the coronavirus. For the full year, it sees low double-digit revenue growth.
On the bright side, it sees production finally above pre-pandemic levels, and inventories normalizing. Another bright spot was direct sales which were 7% higher, reaching $4.8 billion. But, this came at the expense of its wholesale business which saw a 7% drop in revenue. Of course, this isn't too surprising to anyone paying attention to recent earnings reports from retailers.