Nike Scores, but Headwinds Persist

Shares of athletic apparel stalwart Nike have shed a third of their value amid struggles in China, inflation concerns, and a shift in demand from joggers to office slacks. Against that backdrop, the company managed to top expectations during the fiscal fourth quarter.

Nike reported earnings of 90 cents a share and revenue of $12.2 billion. Those results were ahead of consensus expectations for earnings of 81 cents a share and sales of $12.07 billion.

My Barron's colleague Teresa Rivas writes that China revenue fell 20% and its North America business was off 5%, but the company clocked in double-digit sales gains in other regions, on a constant-currency basis. Teresa adds:

Analysts have been racing to lower their estimates ahead of the report. According to FactSet, earnings-per-share revisions for the quarter have come down more than 5% in the last month, and are down 1.1% in the past week alone.

Teresa writes that in China, Nike is caught in a controversy about alleged human rights violations in Xinjiang. Widespread Covid-19 lockdowns have also weighed on demand in China.

Back in the U.S, investors were concerned inflation could lead to a pullback of spending on things like sneakers. Teresa continues:

After all, shoppers stocked up on them during the pandemic and they don’t fit the aesthetic of vacations and weddings, which are back in full force after two years of delay. High apparel inventory at other stores have also sparked worries of widespread discounting.

Therefore a top- and bottom-line beat was likely welcome for investors, given such a mixed earnings season for consumer companies, even if Nike still faces headwinds.

Read more of Teresa's Nike earnings coverage here.