Investing.com -- Nike, Inc. (NYSE:NKE) reported mixed fourth-quarter results as earnings fell short, but revenue topped Wall Street estimates amid an ongoing recovery in China from the pandemic lull and further efforts to cut bloated inventory.
Nike shares fell over 3.6% in pre-market Friday trade following the report.
Nike reported earnings per diluted share of $0.66 on revenue of $12.83 billion. Analysts polled by Investing.com anticipated EPS of $0.68 on revenue of $12.58B. Direct sales rose 15% year-over-year to $5.5B, topping the $5.13B expected.
“NIKE’s strong results make clear that our strategy is working,” said John Donahoe, President & CEO, Nike, Inc. “FY23 was a milestone year for NIKE as our unique advantages continue to drive competitive separation. Our investment in innovation and our digital leadership are fueling broad-based growth across our portfolio of brands, as we create value by serving the future of sport.”
Sales in North America were up 5% for Q4 year-on-year, while in China, an important market for the sportswear giant, sales jumped 16%.
Gross margin, however, decreased 140 basis points to 43.6%, driven by higher costs, higher markdowns, and continued "unfavorable changes in net foreign currency exchange rates." Moreover, CEO Donahoe said Nike has been selling through excess merchandise with discounts, which has weighed on the company's profitability.
Shares were hit when Nike offered guidance on the earnings call, saying that it expects revenues flat to up low-single-digits, below the consensus for growth of 4%.
Still, Wall Street analysts weighed in positively on Nike's earnings report as the company enters FY24 "well positioned," says Stifel analysts.
"We see NKE positioned to raise projections across the year, remain comfortable with estimates above the guide/consensus range, and see FY24 is positioned to be the first of multiple years where NKE margin structure normalizes higher. We reiterate our 12 mos. TP of $143 and would use any weakness in the stock in reaction to the guide as opportunity to build/add to positions," Duffy said in a note.
Similarly, Telsey Advisory Group analysts reiterated a Buy rating on NKE stock.
"The consumer environment is choppy and Nike is not immune with wholesale accounts being more careful and promotions remaining high. However, the Nike and Jordan brand have strong momentum globally and the company is well positioned to benefit from the recovery in China and gain share as DTC continues to outpace wholesale sales. In addition, the profit pressures are beginning to abate with Nike positioned for multi-year operating margin improvement," they wrote.
Additional reporting by Senad Karaahmetovic