Nike Inc (NYSE: NKE). today reported better-than-expected first quarter results, but performance was held back by rising costs, which weighed on gross margins, and a weak performance in China.
The sportswear retailer reported first-quarter revenue growth of 4% on a reported basis to $12.7 billion, above market consensus expectations of $12.3 billion, with a diluted earnings per share of $0.93, down 20%, but in line with expectations.
Gross margins were under pressure, falling 220 basis points to 44.3%, reflecting higher freight and logistics costs, lower margins in the Nike Direct business and unfavorable changes in net foreign exchange rates foreign currencies.
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Selling and administrative expenses rose 10% to $3.9 billion, weighing on the company’s net income, which fell 22% to $1.5 billion.
Nike Direct sales of $5.1 billion increased 8% on a reported basis from the same period last year, while NIKE Brand Digital sales increased 16%, driven by growth 46% in the EMEA region.
Nike brand revenue was $12 billion, up 4% on a reported basis, driven by double-digit growth in EMEA, North America and APLA, which was only partially offset offset by declines in China.
Converse revenue was $643 million, up 2% on a reported basis, driven by double-digit growth in North America and Europe, again partially offset by declines in Asia.
Wholesale revenue increased 1% on a reported basis, with the growth driven by improved levels of available inventory supply for partners.
“Nike’s first quarter results set the stage for another year of strong growth,” said Matthew Friend, executive vice president and chief financial officer.
“Our focus continues to be the consumer, as we take steps to navigate near-term momentum while expanding long-term structural benefits through our direct-to-consumer acceleration strategy.”
John Donahoe, President and CEO, said, “Our strong start to FY23 highlights the depth and breadth of Nike’s global portfolio as we continue to manage volatility.”
Contact Jeremy at jeremy@proactiveinvestors.com
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