Dive Brief:
- Nike inventory units are down double digits, while inventories by dollar value fell by 10% YoY, company executives said Sept. 28.
- “On the whole, we are very comfortable with the level of inventory in the marketplace in relation to the retail sales that we're seeing as we begin increasing levels of wholesale sell-in in our second half,” CFO Matt Friend told analysts on the company’s earnings call.
- Friend also praised the inventory management of the sportswear giant’s retail partners, calling out Dick’s Sporting Goods and other names.
Dive Insight:
Brands like Nike that sell to retailers bore much of the brunt of last year’s inventory tsunami. As retailers held off purchases and cut orders, brands were stuck between managing their own inventory excess and trying to protect their brand value from rampant discounting.
This time last year, Nike’s inventories had surged by 44%. Some of that increase resulted from lapping a supply-constrained 2021, but it was also an effect of consumers and retailers significantly pulling back on their buying.
While still well above 2021 levels by dollar value, Nike has made significant progress in realigning its inventory with demand. Friend said the company’s lackluster 1% growth in wholesale sales to retailers reflected “our proactive decisions to restrain inventory supply and prioritize marketplace health, particularly in North America.”
Morgan Stanley analysts led by Alex Straton noted that the spread between inventory and forward sales improved to -10% from -2% on a quarterly basis in the most recent period. “While there appears less improvement on a vs. ’19 basis, [management] commentary suggested this problem is mostly in the rear-view,” the analysts said in a research note.
Nike’s decline in inventory and its relatively stable gross margin — which was down 10 basis points — stand in stark contrast its rival in the sportswear space, Under Armour. The latter’s inventories grew by 38% in its most recent reporting period while its gross margin fell by 60 basis points.
