Why Is Nike (NKE) Stock Plunging Today?

  • Nike (NKE) stock is tumbling after the company reported that it had implemented large discounts last quarter.
  • The company implemented the discounts in response to excess inventory.
  • Nike reported stronger-than-expected Q1 earnings per share and revenue.


NKE stock - Why Is Nike (NKE) Stock Plunging Today?

Source: mimohe / Shutterstock.com

Nike (NYSE:NKE) stock is the top-trending ticker on social media and is down more than 12% in pre-market trading. The footwear maker said yesterday after the market closed that it had lowered the selling prices of some of its products because it had accumulated excess inventories.

On a positive note, however, Nike also reported slightly stronger-than-expected fiscal first-quarter revenue and earnings per share yesterday. The company’s first fiscal quarter of 2023 ended on Aug. 31.

Markdowns and Gross Margin

Nike reported that its North America unit had lowered the prices that it charged both consumers and wholesalers. The unit implemented the price cuts in order “to liquidate excess inventory,” Nike explained.

Despite the discounts, at the end of Nike’s Q1, the value of its inventory had jumped 44% versus the same period a year earlier to $9.7 billion. The footwear maker blamed “ongoing supply chain volatility” for the huge increase.

The large discounts implemented by the company, along with higher shipping costs and currency fluctuations, caused Nike’s gross margin to fall 2.2 percentage points year-over-year to 44.3%.

Results Beat Analysts’ Expectations

Nike reported Q1 earnings per share of 93 cents, versus analysts’ average estimate of 92 cents. Its sales climbed 3.6% YOY to $12.69 billion, $410 million above analysts’ mean outlook.

During the second quarter, the company repurchased $1 billion of NKE stock.

“I’m proud of our results this quarter as our brand momentum, culture of innovation and proven operational playbook delivered yet another quarter of strong revenue growth,” CEO John Donahoe said on the company’s Q1 earnings call last night.

Two Firms Are Bullish on NKE Stock

Investment bank Jefferies thinks that “Nike’s business and brand are strengthening globally,” while it’s poised to gain market share going forward, The Fly reported. The firm remains bullish on the company’s long-term outlook and kept a “buy” rating on the shares, but it lowered its target on NKE stock to $115 from $130.

Also positive on NKE was another investment bank, Evercore ISI, which recommends that investors buy the shares on weakness today.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2022/09/why-is-nike-nke-stock-plunging-today/.

©2024 InvestorPlace Media, LLC