Published - December 21, 2022 @ 11:21 AM (EET)

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Lauding its success in clearing through a hefty inventory pile, Nike (NYSE:NKE) on Tuesday reported quarterly results that easily topped analyst expectations while raising its guidance.

As Americans rushed to stock up on sneakers and sportswear before Christmas, global sales rose 17% to $13.3 billion from $11.36 billion a year earlier.

While profits were roughly flat from the year-ago quarter, the results surpassed the average estimates of $12.6 billion, sending shares up over 12% in after-hours trading.

Net income for the quarter ending November 30 was $1.33 billion, or 85 cents per share.

Analysts have been keeping an eye on Nike and other retailers for progress in trimming inventories. Although levels jumped 43% from a year earlier, company executives said the number was inflated by abnormally low inventories a year earlier.

The value of its inventory was $9.3 billion in the quarter. Meanwhile, Nike CEO John Donahoe said he believes the company is already past its inventory peak.

EARNINGS RESULTS

Sales in Nike's most profitable market, China, fell 3% as the country experienced significant disruptions due to Covid lockdowns. 

However,  revenue in North America, the retailer's largest market, climbed 30% as the company started increasing discounts this past summer but more aggressively sought to clear out items in the fall quarter.

Executives said strong sales of products with wholesale partners also helped the quarterly performance.

Nike's gross margin reduced from 45.9% a year ago to 42.9% and is expected to decline a further two to 2.5 percentage points next quarter.

Elsewhere, the footwear giant saw a 10% year-over-year increase in selling and administrative expenses to $4.1 billion, fueled mainly by advertising and marketing costs and investment in Nike Direct.

Sales for Nike Direct were up 16% for the quarter at $5.4 billion, and digital sales were up 25%.

Compared with a roughly 20% decline in the S&P500, Nike's shares are down 38% this year through Tuesday's close.

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