Nike Quarterly Results Helped by China’s Reopening, but Profitability Underwhelmed

China Revenue Boost

The sneaker giant reported mostly strong top line results for the quarter ended May 31 (Q4 FY2023), after Wall Street closed on Thursday. Revenues of $12.825 billion, were not only higher on yearly comparison, but also exceeded the previous quarter sales, which includes the December holiday period. [1]

The solid figures were largely driven by greater China, where sales jumped 25% y/y (excluding currency changes), outpacing the other regions. China tracked North America and EMEA in absolute figures, being the third revenue generator with $1.81 billion. Nike ( has some positive developments in the current quarter as well, since its results in June's popular 6/18 shopping festival "surpassed last year's record-breaking performance", according to CFO Matthew Friend. [2]

China has reopened after abandoning the strict zero-Covid policies and despite recent concerns around the strength of the recovery, some sports apparel firms and high-end fashion designers have experienced an uplift this year.

Rival Under Armour (, reported a 31% y/y Revenue rise (currency-neutral) in Asia-Pacific in the quarter ended March 31, "benefitting from China's re-opening" as per its CFO comments [3]. German behemoth Adidas (, was not able to capitalize on the recovery though, since its sales dropped 9.4% y/y in greater China in the same period. On the luxury fashion front, Gucci-owner Kering - one of my stocks to watch in Q3 – saw a return to growth in Asia-Pacific in Q1, attributed largely to "gradual China recovery". [5]

Disappointing Profitability

Despite the good top line performance, Nike's profitability disappointed markets, as Net Income dropped to just over $ 1billion. More to it, Gross Margin was squeezed by 140 basis points, to 43.6%, partly due to higher logistics costs and unfavorable exchange rates, as the USDOLLAR traded higher compared to year ago.

The sports apparel behemoth has been trying to offload excess merchandise and reduce its inventory that ballooned during the pandemic years. More to it, the current environment of high interest rates and elevated inflation, is unfavorable for demand of discretionary goods. The Consumer Discretionary SPDR (, in which Nike is a Top-5 constituent, posted only marginal gains in March-May, before the June rally.

In order to support sales and reduce inventories, such firms need to offer discounts and increase promotional spending, which hurt profitability. Nike reported and 3% rise in demand creation expenses, to $1.1 billion.

Underwhelming Guidance

The bad news did not stop at the bottom line performance, but extended to the timid forward guidance, provided by the company. Nike expects revenue growth to be flat to up low single-digits in Q1 FY2024, which is slower than the reported quarter and partly reflect efforts to minimize inventories [2]. For the Full FY2024, the projections of mid-single digits expansion is not much brighter, since it is significantly less that the 10% increase in FY2023.

The outlook is not particularly inspiring in regards to gross margins either, where the firm forecasts a drop of 50-75 basis points in the quarter. For the full year, the projection of 140-160 bps expansion, is more encouraging.

Stock Reaction is having a mixed year, since it was unable to capitalize on the strong beginning and slumped in May. The external environment remains challenging, but there are reasons for optimism ahead. Markets reacted negatively to Thursday's report, as profitability and forward guidance disappointed, pushing the stock lower in today's pre-market.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



Retrieved 30 Jun 2023


Retrieved 30 Jun 2023


Retrieved 30 Jun 2023


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