Nike Tops Earnings and Revenue Expectations. Why the Stock Is Falling.

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Nike stock initially rose in after-hours trading but then turned negative.

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beat third-quarter earnings expectations, but the stock oscillated in after-hours trading as gross margins contracted.

Nike (ticker: NKE) posted earnings of 79 cents a share, topping estimates for 56 cents a share, according to FactSet.

Sales of $12.4 billion were up 14% from the same quarter a year earlier, higher than expectations for $11.5 billion.

Revenue increased across the company’s main segments, including both direct to consumer and wholesale segments.

Based on the strong third-quarter results, Nike now expects fiscal 2023 revenue to grow in the high-single digit range, up from previous guidance of mid-single digit growth.

Fourth-quarter revenue will either be flat or grow by low-single digits, below consensus estimates.

Shares of Nike jumped immediately after the report, but were off by 2.2% at $122.76 in after-hours trading on Tuesday.

Margins continue to be a problem for Nike. Gross margin decreased by 3.3 percentage points to 43.3%, pummeled by ongoing aggressive discounting activity, unfavorable exchange rates, and higher production and freight costs.

In Nike’s previous quarter, investors mostly overlooked the fact that inventory remained elevated on an annual basis, mostly because gross margins were better than feared, wrote Morgan Stanley analyst Alex Straton ahead of the report. But markets seemed less forgiving this time around.

“Investors would be willing to mostly forgive any outsize gross margin pressure in both 3Q and 4Q, so long as this yields a truly ‘clean’ inventory…


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