The erosion reflects approximately 150 basis points from higher markdowns and higher off-price mix to liquidate elevated inventory, a second straight year of more than 100 basis points of headwinds from elevated freight and logistics costs and 70 basis points of foreign exchange pressure. Gross margins for the fiscal year are now expected to decline between 200-to- 250 basis points (negative 50 basis points to flat previously). For its fiscal year ended May 2024, Nike expects currency-neutral revenue growth of low-double-digits versus the prior year, equating to reported revenue growth of low-to mid-single-digits versus the prior year, assuming the 800 basis points of currency headwinds.Month-to-date retail sales in September were up double-digits versus the prior year, following a strong back-to-school season.The excess inventory primarily relates to apparel products. Inventories ended the quarter ahead 44 percent year-over-year, including 65 percent in North America, its largest market.By region on a currency-neutral basis, revenue grew 17 percent in EMEA, 16 percent in APLA and 13 percent in North America while declining 13 percent in Greater China.Wholesale revenues were up 8 percent on a currency-neutral basis, with growth due to improved levels of the available supply of inventory for partners. Nike Brand Digital sales increased 23 percent on a currency-neutral basis. Nike Direct sales were $5.1 billion, up 14 percent on a currency-neutral basis.The decline was primarily due to elevated freight and logistics costs, higher markdowns in North America and foreign currency exchange pressures. Gross margin in the quarter decreased 220 basis points to 44.3 percent.Net income declined 21.7 percent to $1.5 billion, or 93 cents a share, just ahead of Wall Street’s consensus estimate of 92 cents.Sales were ahead of Wall Street’s consensus estimate of $12.29 billion. Revenues increased 3.6 percent to $12.7 billion and were up 10 percent on a currency-neutral basis.Highlights of the fiscal first quarter ending August 31 include: On Monday, shares showed some recovery, closing at $85.40, up 2.28. Shares of Nike fell $12.21, or 12.8 percent to $83.12 Friday after the release of first-quarter results and the outlook update. Most still held positive ratings on the stock on faith in Nike’s long-term fundamentals. Analysts reduced their price targets for Nike after the company warned that gross margins would remain under pressure over the next few quarters as promotions would be required to clear bloated inventories.
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