Nike Presented Decent Quarterly Numbers, but Many Adverse Factors Weigh on Further Prospects

Nike (NKE) shares rose 8.95% during today’s, September 29th, first trading hour, as the company’s profit beat forecasts, but sales in China missed expectations. The legendary sportswear clothes and equipment manufacturer reported fiscal first-quarter results after the bell on Thursday, September 28, with gross margin and earnings per share beating Wall Street expectations while its wholesale business slowed less than expected. FQ1 earnings of $0.94 per share topped analysts' average estimate of $0.75, however, its revenue of $12.94 billion fell short of estimates of $12.99–13.00 billion. Greater China sales eased to $1.74 billion, missing the average estimate of $1.83 billion.

In terms of the company’s operating stats, Nike managed to reduce total inventory to $8.7 billion from an estimated $8.84 billion, down 10% from the same period last year. Consensus had expected inventories of $8.84 billion. Direct sales were $5.4 billion, up 6% YoY.

The stock now appears fairly valued under the assumption of intensifying international competition, increasing digital sales share in consumption, and, most importantly, unfavorable inflationary expectations.