Nike margins squeezed by deep discounts, shares fall

Nike Inc on Thursday reported a 20% drop in quarterly profit as the sportswear giant's margins were hit by steep discounts to clear excess inventory in North America and a rise in costs.

The company's shares fell 5.2% in extended trading after becoming one of the worst-performing Dow components, down nearly 43% so far this year. Many U.S. retailers have resorted to heavy discounting to get rid of old stocks that have grown in recent quarters, after inflation-hit consumers have opened the purse strings. Nike (NYSE:NKE) announced that its inventories rose 44% to $9.7 billion at the end of the first quarter. The company said it took measures to melt excess inventories through price cuts and shifting more products to wholesale channels. The company's gross margin declined 220 bps to 44.3%. Analysts were expecting a gross margin of 45.4%, according to IBES data from Refinitiv. Nike said costs rose 10% to $3.9 billion in the first quarter, driven by higher transportation and raw material costs. The company's net income fell to $1.47 billion, or 93 cents a share, in the first quarter ended Aug. 31, compared with $1.87 billion, or $1.16 a share, a year earlier. However, total revenue rose 4% to $12.69 billion in the quarter, beating analysts' average estimates of $12.27 billion. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!