1
00:00:00,000 --> 00:00:02,280
Speaker 1: Again, let's haven't look at Nike shares and sleeping back

2
00:00:02,279 --> 00:00:06,000
Speaker 1: in the late session after profitability fell shy of expectations.

3
00:00:06,040 --> 00:00:08,639
Speaker 1: Joining us now to discuss all this is Punam Goyle,

4
00:00:09,000 --> 00:00:13,920
Speaker 1: senior US e commerce and retail analysts of bloom Big Intelligence. Okay,

5
00:00:14,040 --> 00:00:20,280
Speaker 1: profitability fell shy of expectations, but what about profits? Yeah,

6
00:00:20,360 --> 00:00:22,880
Speaker 1: you know, it comes back really to the inventory question,

7
00:00:22,960 --> 00:00:25,040
Speaker 1: and that's a question not just for Nike but across

8
00:00:25,079 --> 00:00:29,159
Speaker 1: all of retail today. Inventories are very, very high. We

9
00:00:29,200 --> 00:00:32,479
Speaker 1: saw that reported inventories were up forty pc in the quarter,

10
00:00:32,960 --> 00:00:35,000
Speaker 1: but when you look at North America, which is where

11
00:00:35,120 --> 00:00:37,519
Speaker 1: most of the pain was or I'd say, like all

12
00:00:37,640 --> 00:00:41,400
Speaker 1: the pain, inventory was up sixty five percent, and in

13
00:00:41,520 --> 00:00:48,000
Speaker 1: transit inventory was up. So there's more profit margin shortfall

14
00:00:48,400 --> 00:00:51,239
Speaker 1: in the near term, especially in their fiscal two que

15
00:00:51,880 --> 00:00:56,800
Speaker 1: as they wind down on some of these inventory positions. Yeah,

16
00:00:56,840 --> 00:01:00,440
Speaker 1: they mentioned that that sales were actually pretty good, particularly

17
00:01:00,440 --> 00:01:05,520
Speaker 1: in North America, but sales falling in the Greater China region.

18
00:01:05,920 --> 00:01:08,959
Speaker 1: I guess part of that's understandable because of the lockdown,

19
00:01:09,720 --> 00:01:12,040
Speaker 1: but there's there's no real sign that that will get

20
00:01:12,080 --> 00:01:16,760
Speaker 1: any better anytime soon. You're absolutely right. The North America

21
00:01:16,840 --> 00:01:19,600
Speaker 1: optick was all driven by promotions. I mean, that's what

22
00:01:19,720 --> 00:01:22,920
Speaker 1: drove the increase. So not a great sales number when

23
00:01:22,920 --> 00:01:26,120
Speaker 1: you look at how it was driven largely through promotional activity.

24
00:01:26,480 --> 00:01:30,520
Speaker 1: And China it's it's, you know, a moving situation. No

25
00:01:30,560 --> 00:01:33,800
Speaker 1: one really knows when he'll get better. It was interesting

26
00:01:33,920 --> 00:01:38,240
Speaker 1: to see them say that as conditions improve, when they improve,

27
00:01:38,600 --> 00:01:41,840
Speaker 1: they do see underlying demand for the brand and that

28
00:01:41,920 --> 00:01:45,440
Speaker 1: the brand heat remains strong. But once again, that could

29
00:01:45,440 --> 00:01:48,920
Speaker 1: take a quarter to unfold or over a year to unfold.

30
00:01:49,320 --> 00:01:52,880
Speaker 1: Um So, China still remains an influx situation and one

31
00:01:52,880 --> 00:01:56,080
Speaker 1: that we're watching very closely. But um, I mean you

32
00:01:56,120 --> 00:01:59,880
Speaker 1: look at gross margins, I think forty four center there about.

33
00:02:00,200 --> 00:02:02,720
Speaker 1: That's a pretty healthy number, although off of course the

34
00:02:02,760 --> 00:02:06,040
Speaker 1: highs we've had, But you know what is going on

35
00:02:06,240 --> 00:02:09,960
Speaker 1: with that side of things. Yeah, it's for the near term,

36
00:02:10,000 --> 00:02:12,640
Speaker 1: gross margins are going to be pressured, especially in this

37
00:02:12,720 --> 00:02:16,320
Speaker 1: fiscal year with the largest UM downside expected in two que.

38
00:02:16,440 --> 00:02:19,000
Speaker 1: But if you look over the longer term, there is

39
00:02:19,040 --> 00:02:21,639
Speaker 1: opportunity for them to still expand that number because, as

40
00:02:21,680 --> 00:02:25,399
Speaker 1: you know, they're making a shift from wholesale to digital

41
00:02:25,400 --> 00:02:29,119
Speaker 1: and as they boot boost their DTC penetration, they're going

42
00:02:29,160 --> 00:02:32,639
Speaker 1: to have a higher mix of better quality margins. That

43
00:02:32,800 --> 00:02:38,960
Speaker 1: coupled with their continuous innovation pipe price selling across the

44
00:02:39,000 --> 00:02:42,560
Speaker 1: new products is also going to help um just boost

45
00:02:42,560 --> 00:02:46,720
Speaker 1: those gross margins. Yeah, that's the direct to consumer sales

46
00:02:47,240 --> 00:02:50,240
Speaker 1: up as it was as good sign because as you say,

47
00:02:50,280 --> 00:02:54,040
Speaker 1: that can help on the on the expenses side. I'm

48
00:02:54,120 --> 00:02:56,040
Speaker 1: kind of curious what you think. I mean, the stock

49
00:02:56,200 --> 00:02:58,920
Speaker 1: was just absolutely hammered and after hours trading. I know

50
00:02:59,040 --> 00:03:02,200
Speaker 1: liquidity is sometimes a bit less than but let me

51
00:03:02,240 --> 00:03:03,760
Speaker 1: just have a look here. I think it's down nine

52
00:03:03,760 --> 00:03:07,640
Speaker 1: and a half percent, nine point and after hours trading. Uh,

53
00:03:08,160 --> 00:03:11,680
Speaker 1: that suggests that investors were very cool to this, uh

54
00:03:11,800 --> 00:03:16,239
Speaker 1: this release. Yeah, I think in general, investors are concerned

55
00:03:16,280 --> 00:03:21,080
Speaker 1: about the macro conditions that could really swing demand in

56
00:03:21,120 --> 00:03:25,240
Speaker 1: the coming quarters. Right, we don't know when and if

57
00:03:25,280 --> 00:03:27,560
Speaker 1: we will enter a recession, how deep it will be.

58
00:03:28,040 --> 00:03:32,079
Speaker 1: Consumers are still being seen to spend today, but could

59
00:03:32,160 --> 00:03:36,040
Speaker 1: that materially change, especially as we go into the largest

60
00:03:36,040 --> 00:03:39,120
Speaker 1: selling periods of the year. Right, Remember holiday is upon

61
00:03:39,240 --> 00:03:42,120
Speaker 1: us right in a few months, so we'll demand weekend.

62
00:03:42,160 --> 00:03:44,200
Speaker 1: Then there'll be an even bigger problem. So I think

63
00:03:44,200 --> 00:03:47,720
Speaker 1: there's a lot of uncertainty in the macro that's keeping

64
00:03:47,720 --> 00:03:52,160
Speaker 1: investors on the sidelines. You know things you covered this

65
00:03:52,240 --> 00:03:56,280
Speaker 1: industry group. What the noise come out of Nike here,

66
00:03:56,800 --> 00:04:00,120
Speaker 1: How is that being replicated elsewhere or isn't it? And

67
00:04:00,160 --> 00:04:03,000
Speaker 1: you know, how would you really at the moment view

68
00:04:03,360 --> 00:04:06,000
Speaker 1: what's going on on main street with regards to retail.

69
00:04:06,000 --> 00:04:08,000
Speaker 1: I shouldn't really talk about mainstream because of course you

70
00:04:08,040 --> 00:04:11,320
Speaker 1: cover e commerce as well, but just about retail generally.

71
00:04:11,360 --> 00:04:15,200
Speaker 1: And is it a polarization still abslutly, this is not

72
00:04:15,320 --> 00:04:17,920
Speaker 1: a Nike only situation. We were at the v from

73
00:04:17,960 --> 00:04:21,960
Speaker 1: Resterday yesterday and you know, they two provided a pretty

74
00:04:21,960 --> 00:04:25,240
Speaker 1: bleak outlook in the near term, and we've heard it

75
00:04:25,279 --> 00:04:28,840
Speaker 1: across other retailers, whether it's e commerce or others. No

76
00:04:28,880 --> 00:04:32,719
Speaker 1: one knows where the macro is going. So the expectation

77
00:04:32,839 --> 00:04:36,120
Speaker 1: is that the consumer will soften to what extent is

78
00:04:36,160 --> 00:04:39,520
Speaker 1: the biggest question. And I think until we have that answer,

79
00:04:40,040 --> 00:04:44,760
Speaker 1: there could be continued risk in the consumer space, especially

80
00:04:44,800 --> 00:04:49,760
Speaker 1: across discretionary spending. Yeah, I suppose if you see you know,

81
00:04:49,960 --> 00:04:54,120
Speaker 1: people losing jobs and edging toward recession, they'll have to

82
00:04:54,160 --> 00:04:58,800
Speaker 1: cut prices even more to stimulate sales, right, so um

83
00:04:58,880 --> 00:05:06,599
Speaker 1: it does as questions about future profitability absolutely yeah. Okay, well, Punam,

84
00:05:06,640 --> 00:05:09,320
Speaker 1: thank you very much for joining us. Punham Goyle, Senior

85
00:05:09,800 --> 00:05:13,320
Speaker 1: US e Commerce and retail analyst at Bloombrigg Intelligence