Shares of Nike (NYSE:NKE) opened the day higher by about 10% after the apparel and footwear corporation reported its first-quarter earnings for fiscal year 2024. As evidenced by the share price appreciation, investors were quite happy with the numbers. The earnings also allowed investors to breathe a sigh of relief, as many had forecasted disappointing earnings due to lower consumer discretionary spending.
First, Nike reported revenue of $12.94 billion, up by 2% year-over-year (YOY) but falling short of the analyst estimate of $12.98 billion. As a result, it’s apparent that the company’s other metrics are responsible for today’s uptick in price.
NKE Stock: 3 Key Reasons Nike Is Up 10% After Earnings
Front and center is Nike’s 10% reduction in inventory to $8.7 billion. Prior to earnings, inventory was a major concern for the company in light of lower discretionary spending.
“On the whole, we’re very comfortable with the level of inventory in the marketplace in relation to the retail sales that we’re seeing as we begin increasing levels of wholesale sell in our second half,” said CFO Matthew Friend.
Nike also reported earnings per share (EPS) of 94 cents, beating the consensus analyst estimate for 75 cents by a wide margin. The EPS equates to net income of $1.45 billion, which fell lower from $1.47 billion YOY. On top of that, the “Just Do It” company maintained its revenue guidance in the mid-single digits.
Meanwhile, Nike continued its four-year $18 billion share repurchase program, which was approved in June 2022. As of Aug. 31, it had repurchased a total of 54 million shares worth $5.9 billion under the program.
However, risks still remain, as is with any investment. “We’re closely monitoring the operating environment, including foreign currency exchange rates, consumer demand over the holiday season, and our second half wholesale order book,” said Friend.
Furthermore, Nike’s gross margins fell by 10 bps, or 0.1%, to 44.2%. This was primarily attributable to higher costs of gold sold, which rose by 2% YOY to $7.21 billion, and offset by strategic pricing changes.
Moving forward, Nike still has a healthy cash pile of $8.8 billion, which fell by $3.1 billion compared to the year-ago period. The cash was used toward dividends, share repurchases and capital expenditures.
On the date of publication, Eddie Pan did not hold (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.
