Speaker 1: Again, let's haven't look at Nike shares and sleeping back
Speaker 1: in the late session after profitability fell shy of expectations.
Speaker 1: Joining us now to discuss all this is Punam Goyle,
Speaker 1: senior US e commerce and retail analysts of bloom Big Intelligence. Okay,
Speaker 1: profitability fell shy of expectations, but what about profits? Yeah,
Speaker 1: you know, it comes back really to the inventory question,
Speaker 1: and that's a question not just for Nike but across
Speaker 1: all of retail today. Inventories are very, very high. We
Speaker 1: saw that reported inventories were up forty pc in the quarter,
Speaker 1: but when you look at North America, which is where
Speaker 1: most of the pain was or I'd say, like all
Speaker 1: the pain, inventory was up sixty five percent, and in
Speaker 1: transit inventory was up. So there's more profit margin shortfall
Speaker 1: in the near term, especially in their fiscal two que
Speaker 1: as they wind down on some of these inventory positions. Yeah,
Speaker 1: they mentioned that that sales were actually pretty good, particularly
Speaker 1: in North America, but sales falling in the Greater China region.
Speaker 1: I guess part of that's understandable because of the lockdown,
Speaker 1: but there's there's no real sign that that will get
Speaker 1: any better anytime soon. You're absolutely right. The North America
Speaker 1: optick was all driven by promotions. I mean, that's what
Speaker 1: drove the increase. So not a great sales number when
Speaker 1: you look at how it was driven largely through promotional activity.
Speaker 1: And China it's it's, you know, a moving situation. No
Speaker 1: one really knows when he'll get better. It was interesting
Speaker 1: to see them say that as conditions improve, when they improve,
Speaker 1: they do see underlying demand for the brand and that
Speaker 1: the brand heat remains strong. But once again, that could
Speaker 1: take a quarter to unfold or over a year to unfold.
Speaker 1: Um So, China still remains an influx situation and one
Speaker 1: that we're watching very closely. But um, I mean you
Speaker 1: look at gross margins, I think forty four center there about.
Speaker 1: That's a pretty healthy number, although off of course the
Speaker 1: highs we've had, But you know what is going on
Speaker 1: with that side of things. Yeah, it's for the near term,
Speaker 1: gross margins are going to be pressured, especially in this
Speaker 1: fiscal year with the largest UM downside expected in two que.
Speaker 1: But if you look over the longer term, there is
Speaker 1: opportunity for them to still expand that number because, as
Speaker 1: you know, they're making a shift from wholesale to digital
Speaker 1: and as they boot boost their DTC penetration, they're going
Speaker 1: to have a higher mix of better quality margins. That
Speaker 1: coupled with their continuous innovation pipe price selling across the
Speaker 1: new products is also going to help um just boost
Speaker 1: those gross margins. Yeah, that's the direct to consumer sales
Speaker 1: up as it was as good sign because as you say,
Speaker 1: that can help on the on the expenses side. I'm
Speaker 1: kind of curious what you think. I mean, the stock
Speaker 1: was just absolutely hammered and after hours trading. I know
Speaker 1: liquidity is sometimes a bit less than but let me
Speaker 1: just have a look here. I think it's down nine
Speaker 1: and a half percent, nine point and after hours trading. Uh,
Speaker 1: that suggests that investors were very cool to this, uh
Speaker 1: this release. Yeah, I think in general, investors are concerned
Speaker 1: about the macro conditions that could really swing demand in
Speaker 1: the coming quarters. Right, we don't know when and if
Speaker 1: we will enter a recession, how deep it will be.
Speaker 1: Consumers are still being seen to spend today, but could
Speaker 1: that materially change, especially as we go into the largest
Speaker 1: selling periods of the year. Right, Remember holiday is upon
Speaker 1: us right in a few months, so we'll demand weekend.
Speaker 1: Then there'll be an even bigger problem. So I think
Speaker 1: there's a lot of uncertainty in the macro that's keeping
Speaker 1: investors on the sidelines. You know things you covered this
Speaker 1: industry group. What the noise come out of Nike here,
Speaker 1: How is that being replicated elsewhere or isn't it? And
Speaker 1: you know, how would you really at the moment view
Speaker 1: what's going on on main street with regards to retail.
Speaker 1: I shouldn't really talk about mainstream because of course you
Speaker 1: cover e commerce as well, but just about retail generally.
Speaker 1: And is it a polarization still abslutly, this is not
Speaker 1: a Nike only situation. We were at the v from
Speaker 1: Resterday yesterday and you know, they two provided a pretty
Speaker 1: bleak outlook in the near term, and we've heard it
Speaker 1: across other retailers, whether it's e commerce or others. No
Speaker 1: one knows where the macro is going. So the expectation
Speaker 1: is that the consumer will soften to what extent is
Speaker 1: the biggest question. And I think until we have that answer,
Speaker 1: there could be continued risk in the consumer space, especially
Speaker 1: across discretionary spending. Yeah, I suppose if you see you know,
Speaker 1: people losing jobs and edging toward recession, they'll have to
Speaker 1: cut prices even more to stimulate sales, right, so um
Speaker 1: it does as questions about future profitability absolutely yeah. Okay, well, Punam,
Speaker 1: thank you very much for joining us. Punham Goyle, Senior
Speaker 1: US e Commerce and retail analyst at Bloombrigg Intelligence