To The Moon

Seldom did $Nike(NKE)$ plummet 9% after earnings, but 23FQ1 made it. It's just Nike is experiencing an awkward "disaster".

A glance at the performance.

• Revenue 12.69 billion US dollars, a year-on-year increase of 3.6%, beat market consensus of 12.31 billion US dollars;
• Gross profit 5.62 billion US dollars, a year-on-year decrease of 1.42%, but it also beat market consensus 5.54 billion US dollars;
• GAAP's net income US $1.47 billion, a year-on-year decrease of 21.7%, miss market consensus of US $1.49 billion.

Gross profit margin decreased by 220 basis points to 44.3%, which was lower than the market consensus of 45.4%.

Increase of cost mainly comes from,

• First, logistics, June-August's inflation is the highest;
• Second, raw materials, both cotton and oil (Polyester) cost much expensive than last year.

Trend of cotton

As for net income, due to soaring marketing expenses.

Due to the unexpected increase in inventory, Nike has adopted Nike Direct price reduction and increased wholesale sales in North America and other places to clean up surplus inventory.

Cash" and Inventory", Nike obviously chose the former one. After all, the expectation recession is getting stronger.

From segments,

Footwear sales is still strong, but only limited to America. Whether in Europe or the Greater China, footwear sales miss market consensus. While Appareals and Equipments are not so surprised.

More important is revenue of Geos.

Revenue growth in North America keeps 12.9% year-on-year and beat expectations by 8.0%, including unexpected discount promotions in online and offline channels. However, growth in Europe is just 1%, Latin America is 4.8%, and Greater China is -16%.

One factor that can not be ignored is the exchange rate. Since all non-US currencies depreciated from June to August, and the depreciation rate exceeded 10% year-on-year, the impact of foreign exchange headwinds on the company is pivotal. In original currency terms, the growth in Europe is 17%, and that in Asia-Pacific and Latin America is 16%.

As for Greater China, the impact of RMB depreciation causes 3 percentage headwind, which is not big in fact.

Nike is sufferring in China. Executives, only because so-called COVID-19?

No

We believe there are several reasons:

First, Nike's brand influence has declined. This is since its "boycott of Xinjiang cotton". Nike brand non-footwear products are constantly losing brand premium in China;

Second, the market competition is more intense.Under the influence of live broadcast with goods, there is a certain possibility that "bad money drives out good money", which will not be discussed.

Third, there is a lack of innovative products. Nike has only declined in clothing and accessories before, while footwear still has a lot of say, but it has declined for four consecutive quarters, which also represents a certain trend. The needs of young people are definitely becoming more and more diversified, and Nike is becoming more and more difficult to meet.

Fourth, imitations. Nike moved more production lines to Southeast Asia earlier, and it is unknown how much cost advantage it can bring. However, it is difficult to raise tigers, so we can only watch them do well in the market.

Why did the stock price drop this time?

Nike, like Starbucks, their pricing power is mainly on hedge funds and pensions. they don't care much about the performance in China.

What's more, there is the company's repurchase support.

But why this time plunged?

The fear of global economic recession. Even Nike, the head company, has to cut prices to promote sales and recover cash flow. Does it mean that the next situation is even more difficult?

At least North America can still have the dollar to support it, and other regions are really seeking more blessings for themselves.

Congratulations, you have found a Tiger card. You can leave a message "Tiger is here" in the comments section of the post & win 20 Tiger Coins.

In addition, the first people who finds the card and comments on this post will get a special gift.

​​​​​​Click here to view more​ details​.