Nike to offer big discounts amid a glut of inventory

Inflation-battered shoppers will soon find some huge deals on Nike products.

The world’s biggest sportswear company said it was stuck with a glut of out-of-season inventory that will force it to mark down prices going into the all-crucial holiday period.

Nike, based in Beaverton, Ore., said it will be “aggressively” liquidating its apparel and sneakers as it powers through elevated inventory levels – up 44% overall and 65% in North America, the company said as it reported results for its latest quarter on Thursday.

Nike top brass blamed supply chain issues including COVID lockdowns in China – where about 30% of its sneakers and 20% of its apparel are made – that resulted in its spring, summer and fall products arriving late this year.

“We effectively have a few seasons landing in the marketplace at the same time,” chief financial officer Matt Friend said on an earnings call with analysts on Thursday, adding that some of that inventory is now “seasonally out of relevance” and will be cleared out more quickly to make room for the “newest and best inventory.”  

Analysts cautioned Nike’s negative update could mean that margin pressure across the broader retail sector was likely to be worse than feared.

“Nike’s sniffle raises risk the group catches a cold,” Baird analyst Jonathan Komp said. “Given Nike’s (update and) plans to aggressively liquidate out-of-season goods over the next two quarters, we see risk that the overall industry becomes much more promotional as a result.”

Nike said it will offer huge discounts to get rid of its excess product, a dramatic reversal from the past two years when retailers struggled to get enough items on store shelves.

The newer products will go out to its retail partners, like Foot Locker and Dick’s Sporting Goods, and to Nike Direct, the company said, while the excess product will get shipped to Nike Factory stores.

“We’ll use digital a little bit to liquidate some of the excess apparel and we’ll use other partners in wholesale to liquidate it,” Friend said. 

Nike shares were down nearly 10% to $86 and set to shed about $15 billion in market value, if losses hold through the session.

Shares of Under Armour slipped 7.3%, while those of German peers Adidas and Puma fell 5% and 8.3%, respectively.

“Nike’s promotions and outlook is a bad omen for guidance at Under Armour, Adidas, Puma, and others in the athletic space,” Cowen analyst John Kernan said, adding he expects forecast cuts at those brands.

Retail chains Dick’s Sporting Goods Inc and Foot Locker Inc dropped 7.2% and 3.2%, respectively, with Lululemon Athletica Inc tumbling nearly 6%.

The average stock rating of 36 brokerages covering Nike is “buy” and the median price target is $115, down from $130 a month ago.

With Post wires