Nike’s sales in North America rose 5% in the fourth quarter, the slowest in four quarters as US wholesalers became more prudent in placing newer orders. Credit: pio3 via Shutterstock.

NIKE exceeded expectations for quarterly revenue, outperforming Wall Street estimates.

The sportswear giant saw a boost in sales due to a recovering market in China. However, the company faced challenges with shrinking profit margins due to increased markdowns.

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Strong demand for popular shoes drives sales

Despite ongoing inflation impacting household budgets, Nike experienced strong demand for its popular shoe models, including the Invincible 3 and Jordan Mid-1.

Customers, particularly those with higher incomes, eagerly purchased these sought-after footwear options. Nike reported a notable 5% increase in sales in its largest market, North America.

This growth was complemented by a significant 16% jump in sales in China following the relaxation of pandemic-related restrictions. The company’s performance in both regions contributed to its overall revenue growth.

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Increased discounts attract more customers

To manage excess inventory of apparel and footwear, Nike implemented a strategy of offering more discounts. This approach successfully attracted a greater number of customers to its stores, leading to increased sales.

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However, the company’s profit margins suffered as a consequence of this markdown strategy.

Despite the positive sales results, Nike experienced a decline in profit margins. The company’s margin fell by 140 basis points, from 45% in the previous year to 43.6% in the current reporting period.

The impact of increased markdowns and discounting initiatives contributed to this decrease.

Nike exceeds analyst expectations

According to Refinitiv data, Nike’s fourth-quarter revenue reached $12.83bn, surpassing the anticipated figure of $12.59bn.

Despite this positive performance, Nike’s shares experienced a slight decline in extended trading.