Nike Q4 earnings are ‘not suggestive of a recession’

Nike Inc (NYSE: NKE) ticked lower in extended hours after reporting weaker-than-expected earnings for its fourth financial quarter.

Why else is Nike stock down in after hours?

Shareholders are also a bit unsettled because higher costs, increased markdowns, and currency headwinds resulted in a 140 basis points hit to gross margins that stood at 43.6% in Q4. Still, Oppenheimer analyst Brian Nagel said on Yahoo Finance Live:

His outperform rating on Nike stock comes with a $150 price target that suggests about a 40% upside from here.

Nike Q4 earnings snapshot

• Earned $1.03 billion versus the year-ago $1.44 billion
• Per-share earnings also slipped from 90 cents to 66 cents
• Revenue climbed 5.0% year-over-year to $12.83 billion
• Consensus was 68 cents a share on $12.58 billion revenue
• Returned $1.9 billion in dividends and share repurchase

Wholesale revenue came in down 2.0% in the recently concluded quarter. Nike stock is now down 10% versus the start of 2023.

What else was noteworthy in the earnings report?

Nike ended the quarter with $8.45 billion worth of inventory – roughly the same as a year ago. Oppenheimer’s Nagel added:

It is also noteworthy that inventory was actually down sequentially from $8.9 billion, as per the earnings press release. Nike’s direct sales also went up 15% to $5.5 billion in Q4.

More importantly, the athletic footwear and apparel company noted a 16% boost to revenue in China versus an 8.0% decline in the prior quarter. According to the Oppenheimer analyst: