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.

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.

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.