Nike Inc (NYSE:NKE). reported better than expected first quarter results today but performance was held back by rising costs, which dented gross margins, and a weak performance in China.
The sportswear retailer posted 4% growth in first quarter revenues on a reported basis to US$12.7 billion, above the market consensus expectations of US$12.3 billion, with diluted earnings per share of US$0.93, down 20%, but in line with expectations.
Gross margins came 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 currency exchange rates.
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Selling and administrative expenses increased 10% to $3.9 billion denting the company’s net income which fell 22% to US$1.5 billion.
Nike Direct sales of $5.1 billion were 8% higher on a reported basis than in the same period last year while NIKE Brand Digital sales increased 16% led by 46% growth in EMEA.
Revenues for the Nike brand were $12 billion, up 4% on a reported basis, driven by double-digit growth in EMEA, North America and APLA, which was only partially offset by declines in China.
Revenues for Converse were $643 million, up 2% percent on a reported basis, led by double-digit growth in North America and Europe, again partially offset by declines in Asia.
Wholesale revenues increased 1% on a reported basis with growth due to improved levels of available supply of inventory for partners.
“Nike's first quarter results set the foundation 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 action to navigate near-term dynamics while expanding long-term structural benefits through our consumer direct 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 through volatility.”
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