Nike Drops After Results, Morgan Stanley Positive After 'Reset' Quarter

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By Senad Karaahmetovic

Shares of Nike (NYSE:NKE) are down over 2% in pre-open Tuesday after the sportswear retailer reported results for its fiscal fourth quarter.

Revenue came in at $12.23 billion, down 0.9% on the year, to top the $12.13 billion consensus. EPS was reported at $0.90 per share to again beat the $0.81 consensus.

For North America, Nike reported sales of $5.12 billion, lower than the $5.23 estimate. Revenues for EMEA and Greater China regions were reported at $3.25 billion and $1.56 billion, compared to consensus of $3.01 billion and $1.74 billion, respectively.

Nike also reported a gross margin of 45%, lower than the expected 46.7%. Inventory levels were once again in the spotlight as they continue to swell - $8.42 billion, up 23% YoY, and higher than the $7.03 billion consensus.

The retailer also announced a new $18 billion stock buyback program.

Morgan Stanley analyst Alex Straton said the quarter was “the reset we hoped for” as investors were bracing for difficult results. The analyst cut the price target to $149.00 per share, down from $159.00.

“The stock could mark time N-T after today’s post-close move on the ongoing, unresolved China debate. But the‘23e EPS reset could set NKE up for beats & raises throughout the year, which could lift shares higher in 2H23 & beyond,” Straton said in a client note.

Oppenheimer analyst Brian Nagel said the results showed that underlying trends at Nike remain to be solid.

“While recent trends at Nike have proven choppier and more disrupted than initially expected, we believe data suggest clearly that underlying demand for the company’s products, in regions across the globe, remains strong and that NKE is positioned increasingly well to emerge from current macro malaise an even better positioned operator,” Nagel wrote in a note.