A Nike store.
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The sportswear giant on Thursday reported a 44% increase in inventory.
The company’s last three seasons of product arrived late and holiday merchandise arrived early.
Nike plans to discount older merchandise and clear out offseason products before the holidays.
Nike products are about to go on sale nationwide.
The sportswear company on Thursday reported a 44% increase in inventory and said it plans to ramp up discounting in order to clear out some of its $9.7 billion in footwear and apparel before the holidays.
Nike isn’t the only company dealing with elevated inventory. Target, Walmart and Kohl’s are among other large retailers working through flooded backrooms.
While the spike in Nike’s inventory got the attention of analysts on a Thursday earnings call, executives also reiterated their confidence in the company’s core business plan, which is focused on direct, digital sales.
Nike’s quarterly revenue increased 10%, not including currency charges, to $12.7 billion, above Wall Street expectations of $12.28 billion. The company reported 93 cents in quarterly earnings per share, above the 92 cents expected by analysts.
Direct and digital sales, not including currency charges, increased 14% and 23%, respectively.
On the call with analysts, Nike executives said inventory peaked in the quarter for several reasons, including late product arrivals for the last three seasons because of the pandemic. Nike also ordered, and received, holiday merchandise early. Added to that, executives said inventory a year ago was lower than normal because of factory closures.
Nike has already started discounting products, mostly focusing on offseason apparel. It hopes to clear out older merchandise in time for the holiday season.
“We’re really focused on trying to clear through that late off-season apparel inventory that we have predominantly in North America, but we do have a little bit of it in (Europe) and (Asia) as well,” said Chief Financial Officer Matt Friend.
Nike shares were down 9% Thursday in after-hours trading within a few hours of the earnings report.
Analysts warned the excess inventory will pressure the company’s margins because of the need to discount merchandise.
Nike CEO John Donahoe said, inventory problems aside, the company’s core business plan is working.
“I’m proud of our results this quarter as our brand momentum, culture of innovation and proven operational playbook delivered yet another quarter of strong revenue growth,” he said. “Our brand strength continues to give us confidence in sustaining our top line momentum.”