WEBVTT - Poonam Goyal on Nike (Audio)

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<v Speaker 1>Again, let's haven't look at Nike shares and sleeping back

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<v Speaker 1>in the late session after profitability fell shy of expectations.

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<v Speaker 1>Joining us now to discuss all this is Punam Goyle,

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<v Speaker 1>senior US e commerce and retail analysts of bloom Big Intelligence. Okay,

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<v Speaker 1>profitability fell shy of expectations, but what about profits? Yeah,

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<v Speaker 1>you know, it comes back really to the inventory question,

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<v Speaker 1>and that's a question not just for Nike but across

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<v Speaker 1>all of retail today. Inventories are very, very high. We

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<v Speaker 1>saw that reported inventories were up forty pc in the quarter,

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<v Speaker 1>but when you look at North America, which is where

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<v Speaker 1>most of the pain was or I'd say, like all

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<v Speaker 1>the pain, inventory was up sixty five percent, and in

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<v Speaker 1>transit inventory was up. So there's more profit margin shortfall

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<v Speaker 1>in the near term, especially in their fiscal two que

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<v Speaker 1>as they wind down on some of these inventory positions. Yeah,

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<v Speaker 1>they mentioned that that sales were actually pretty good, particularly

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<v Speaker 1>in North America, but sales falling in the Greater China region.

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<v Speaker 1>I guess part of that's understandable because of the lockdown,

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<v Speaker 1>but there's there's no real sign that that will get

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<v Speaker 1>any better anytime soon. You're absolutely right. The North America

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<v Speaker 1>optick was all driven by promotions. I mean, that's what

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<v Speaker 1>drove the increase. So not a great sales number when

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<v Speaker 1>you look at how it was driven largely through promotional activity.

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<v Speaker 1>And China it's it's, you know, a moving situation. No

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<v Speaker 1>one really knows when he'll get better. It was interesting

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<v Speaker 1>to see them say that as conditions improve, when they improve,

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<v Speaker 1>they do see underlying demand for the brand and that

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<v Speaker 1>the brand heat remains strong. But once again, that could

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<v Speaker 1>take a quarter to unfold or over a year to unfold.

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<v Speaker 1>Um So, China still remains an influx situation and one

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<v Speaker 1>that we're watching very closely. But um, I mean you

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<v Speaker 1>look at gross margins, I think forty four center there about.

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<v Speaker 1>That's a pretty healthy number, although off of course the

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<v Speaker 1>highs we've had, But you know what is going on

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<v Speaker 1>with that side of things. Yeah, it's for the near term,

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<v Speaker 1>gross margins are going to be pressured, especially in this

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<v Speaker 1>fiscal year with the largest UM downside expected in two que.

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<v Speaker 1>But if you look over the longer term, there is

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<v Speaker 1>opportunity for them to still expand that number because, as

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<v Speaker 1>you know, they're making a shift from wholesale to digital

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<v Speaker 1>and as they boot boost their DTC penetration, they're going

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<v Speaker 1>to have a higher mix of better quality margins. That

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<v Speaker 1>coupled with their continuous innovation pipe price selling across the

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<v Speaker 1>new products is also going to help um just boost

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<v Speaker 1>those gross margins. Yeah, that's the direct to consumer sales

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<v Speaker 1>up as it was as good sign because as you say,

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<v Speaker 1>that can help on the on the expenses side. I'm

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<v Speaker 1>kind of curious what you think. I mean, the stock

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<v Speaker 1>was just absolutely hammered and after hours trading. I know

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<v Speaker 1>liquidity is sometimes a bit less than but let me

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<v Speaker 1>just have a look here. I think it's down nine

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<v Speaker 1>and a half percent, nine point and after hours trading. Uh,

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<v Speaker 1>that suggests that investors were very cool to this, uh

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<v Speaker 1>this release. Yeah, I think in general, investors are concerned

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<v Speaker 1>about the macro conditions that could really swing demand in

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<v Speaker 1>the coming quarters. Right, we don't know when and if

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<v Speaker 1>we will enter a recession, how deep it will be.

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<v Speaker 1>Consumers are still being seen to spend today, but could

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<v Speaker 1>that materially change, especially as we go into the largest

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<v Speaker 1>selling periods of the year. Right, Remember holiday is upon

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<v Speaker 1>us right in a few months, so we'll demand weekend.

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<v Speaker 1>Then there'll be an even bigger problem. So I think

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<v Speaker 1>there's a lot of uncertainty in the macro that's keeping

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<v Speaker 1>investors on the sidelines. You know things you covered this

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<v Speaker 1>industry group. What the noise come out of Nike here,

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<v Speaker 1>How is that being replicated elsewhere or isn't it? And

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<v Speaker 1>you know, how would you really at the moment view

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<v Speaker 1>what's going on on main street with regards to retail.

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<v Speaker 1>I shouldn't really talk about mainstream because of course you

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<v Speaker 1>cover e commerce as well, but just about retail generally.

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<v Speaker 1>And is it a polarization still abslutly, this is not

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<v Speaker 1>a Nike only situation. We were at the v from

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<v Speaker 1>Resterday yesterday and you know, they two provided a pretty

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<v Speaker 1>bleak outlook in the near term, and we've heard it

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<v Speaker 1>across other retailers, whether it's e commerce or others. No

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<v Speaker 1>one knows where the macro is going. So the expectation

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<v Speaker 1>is that the consumer will soften to what extent is

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<v Speaker 1>the biggest question. And I think until we have that answer,

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<v Speaker 1>there could be continued risk in the consumer space, especially

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<v Speaker 1>across discretionary spending. Yeah, I suppose if you see you know,

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<v Speaker 1>people losing jobs and edging toward recession, they'll have to

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<v Speaker 1>cut prices even more to stimulate sales, right, so um

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<v Speaker 1>it does as questions about future profitability absolutely yeah. Okay, well, Punam,

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<v Speaker 1>thank you very much for joining us. Punham Goyle, Senior

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<v Speaker 1>US e Commerce and retail analyst at Bloombrigg Intelligence