Nike outruns its competitors

NBA: Preseason-Minnesota Timberwolves at Miami Heat
Oct 4, 2022; Miami, Florida, USA; Miami Heat guard Tyler Herro (14) warms up in Nike shoes before a preseason against the Minnesota Timberwolves at FTX Arena.

NEW YORK, March 22 (Reuters Breakingviews) - The ball is in Nike’s (NKE.N) court. The $195 billion sportswear giant posted a 14% rise in revenue in third-quarter earnings on Tuesday. Its challenges include unsold goods it has to shift, an 8% drop in year-on-year sales in China, and falling gross profit margins. Nike is nonetheless in a relatively enviable position.

The Beaverton, Oregon-based company saw its direct-to-consumer sales rise 17% to $5.3 billion compared with the same quarter a year earlier, while wholesale revenue grew 12%. The company run by John Donahoe seems to be getting a better handle on inventories, which rose 16% year-on-year, compared to a 43% jump in the second quarter, better than rivals. Nike’s unsold goods would take about 116 days to sell based on its quarterly earnings data, faster than the 170 days implied by Adidas’ (ADSGn.DE) full-year figures and Under Armour’s (UAA.N) 125 days.

The Air Jordan maker is also benefiting from its rivals’ pain: Adidas’ botched partnership with the musician formerly known as Kanye West could be potentially costly. Nike is also sporting a five-year total shareholder return of 105%, where Adidas and Under Armour’s are both negative. Even with blips, that shows it has been a better long-term run for investors. (By Sharon Lam)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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