in a weak and unstable macroeconomic climate even nike inc nke is struggling with bloated inventory and therefore moving forward cautiously despite beating wall street’s expectations for its fiscal thirdquarter earnings and revenue the worlds largest athletic apparel company struggled with softer than expected sales in china during the holiday quarter for the quarter that ended on february 28th sales rose from last year’s 1087 billion to 1239 billion easily topping the expected 1147 billion net income rose from 14 billion or 87 cents per share a year earlier to 12 billion or 79 cents per share also exceeding the expected 55 cents selling and administrative expenses also rose 15 to 4 billion largely as a consequence of wagerelated expenses and directselling efforts all retailers including nike had one single wish during the holidays and that was to liquidate excess inventory that resulted from supply chain disruptions and changing consumer preferences due to inflationary pressures quarter over quarter nike offloaded about 400 million in inventories with inventories up 16 compared to last year’s period at 89 billion that has been attributed to product input costs and freight expenses rose over the last two quarters nike was relying on its partnerships with wholesalers to offload inventory with wholesale revenues rising12 in the quarter following 19 growth during the previous quarter as a result of higher markdowns and promotions gross margin fell to 433 which translates to a decrease of 33 percentage points although china is on road to recovery the sales rebound didn’t happen at nike’s thirdbiggest market by revenue despite the end of the country’s zerocovid policy sales fell 8 during to 199 billion while street account expected 209 billion when asked about its outlook on china’s recovery nike ceo john donahoe said the company feels good about its momentum in the region with growth picking up the second month of the quarter after lockdowns ended besides china all markets experienced doubledigit sales increases north america saw sales rise 27 while europe middle east and africa saw revenue expand 17 compared to last year’s comparable quarter followed by a 10 sales rise in asia pacific and latin america fiscal year revenue is expected to grow by high single digits as opposed to midsingle digit guidance given in the prior quarter gross margins are expected to decline by 25 percentage points which is the low end of the previously given guidance range that reflects the company’s ongoing efforts to get rid of bloated inventory full year expenses are now expected to rise 10 in the undergoing quarter nike expects flat to low single digit revenue growth cfo matthew friend said the company is taking a “cautious approach” to planning given the uncertainty about consumer confidence and the economy assuring that the company is well equipped to handle this high level of volatility the dtc bet is paying off for the last several years nike has been pushing directtoconsumer sales and has invested heavily to build this channel by building out experiential stores developing its loyalty program and growing its ecommerce efforts nike direct sales were up 17 to 53 billion while nike digital sales jumped 20 digital sales made up 27 of sales this summer nike wll be releasing its first ever genderneutral athletic wear collection this summer sabrina ionescu will be the newest member of its signature athlete family during the earnings call it was implied that this micro metaverse built on the roblox corporation rblx platform will have a significant role in nike’s marketing and branding strategy over the upcoming years nikeland has already become a benchmark for many other brands against which they can measure their own success in the digital universe after all artificial intelligence ai ecommerce and instore experiential technology have been integral to the nike’s strategy for a while back nike should end the fiscal year with healthy inventory levels management is increasingly confident of seeing a “leaner inventory” than anticipated given sales momentum with now four decades of celebrating nike air max day on march 26th nike is still on the forefront of transformation and it usually ends up ‘just doing’ what it envisions