(Reuters) -Nike Inc reported a 20% decline in its quarterly profit on Thursday, with the sportswear giant’s margins being pummeled by higher discounts in North America to clear excess inventory and a surge in costs.
The company’s shares fell 5.2% in extended trading following a near 43% tumble so far this year that has made them one of the worst performing Dow components.
Several U.S. retailers have turned to heavy discounting in recent quarters to get rid of burgeoning old stock after inflation-hit consumers tightened their purse strings.
Nike said its inventories were up 44% at $9.7 billion at the end of the first quarter. The company said it had taken measures to liquidate excess inventories through markdowns and shifting more products to wholesale channels.
The company’s gross margin decreased 220 basis points to 44.3%. Analysts had expected gross margin of 45.4%, according to IBES data from Refinitiv.
Nike said costs rose 10% to $3.9 billion in the first quarter, hurt by higher shipping and raw material costs.
The company’s net income fell to $1.47 billion, or 93 cents per share, in the first quarter ended August 31, from $1.87 billion, or $1.16 per share, a year earlier.
However, total revenue rose 4% to $12.69 billion in the quarter, beating analysts’ average estimates of $12.27 billion.
(Reporting by Mehr Bedi in Bengaluru; Editing by Sriraj Kalluvila)
