Inflation-battered shoppers will soon find huge deals on Nike products.
The world’s largest sportswear company said it was stuck with a glut of off-season inventory that would force it to cut prices ahead of the crucial holiday period.
Beaverton, Oregon-based Nike said it would “aggressively” liquidate apparel and sneakers as it fueled high inventory levels – up 44% overall and 65% in America du Nord, the company said when releasing results for its latest quarter on Thursday.
Nike Top Brass blamed supply chain issues, including COVID lockdowns in China – where around 30% of its sneakers and 20% of its apparel are made – which led to the arrival of its spring products, d summer and fall at the end of this year.
“We do have a couple of seasons coming into the market at the same time,” chief financial officer Matt Friend said on a conference call with analysts on Thursday, adding that some of that inventory is now “irrelevant seasonal.” and will be erased. get out faster to make room for “the newest and best inventory”.
Analysts warned that Nike’s negative update could mean margin pressure across the retail sector is likely to be worse than expected.
“Nike sniffing increases the risk of the group catching a cold,” Baird analyst Jonathan Komp said. “Given Nike’s (updated and) plans to aggressively liquidate off-season products over the next two quarters, we see the risk that the industry as a whole will become much more promotional as a result.”
Nike said it would offer huge discounts to get rid of its excess product, a dramatic reversal from the past two years when retailers struggled to get enough items on store shelves.
The new products will be shipped to its retail partners, such as Foot Locker and Dick’s Sporting Goods, and Nike Direct, the company said, while excess product will be shipped to Nike Factory stores.
“We will use digital a bit to liquidate some of the excess apparel and we will use other wholesale partners to liquidate it,” Friend said.
Shares of Nike closed down nearly 13% on Friday at $83.12 and are expected to lose about $15 billion in market value.
Shares of Under Armor fell 7.3%, while those of their German counterparts Adidas and Puma fell 5% and 8.3%, respectively.
“Nike’s promotions and outlook bode ill for the advice of Under Armour, Adidas, Puma and others in sports,” said Cowen analyst John Kernan, adding that he s expect reductions in forecasts for these brands.
Retail chains Dick’s Sporting Goods Inc and Foot Locker Inc fell 7.2% and 3.2%, respectively, while Lululemon Athletica Inc fell nearly 6%.
The average stock rating of 36 brokerages covering Nike is “buy” and the median price target is $115, down from $130 a month ago.
With post wires
