Nike reported better-than-expected results for the third quarter — despite recent inventory excesses and challenges in China.
The athletic giant reported Q3 revenues of $12.4 billion, up 14% from the same time last year and ahead of expectations from analysts surveyed by Yahoo. Net income was $1.2 billion, down 11% compared to the prior year. Diluted earnings per share were $0.79, down 9% over the same time last year, but also ahead of analysts’ expectations for the quarter.
Every region experienced currency-neutral growth in Q3, with sales in Greater China up 1%.
Nike Direct sales were up 22% to $5.3 billion, and Nike brand digital sales were up 24%. Notably, wholesale revenues grew 18% in the quarter — the second consecutive quarter of impressive growth — even as Nike continues to emphasize its DTC channels.
“Our wholesale channel continues to be an important part of our strategy as we access key consumer segments and achieve distribution scale across the marketplace,” Nike CEO and president John Donahoe said in prepared remarks to investors.
Part of this wholesale growth was due to comparisons to the prior-year, in which inventory availability in the wholesale channel was lower than usual, though it is clear Nike is not neglecting this channel, despite its focus on DTC. In December, Nike reported that its wholesale business grew in Q2 by 30%, compared to Nike Direct, which grew 25%.
And just yesterday, Foot Locker said it has reignited a strong partnership with Nike, which previously indicated a move to limit the amount of product it would sell to the retailer. Nike will remain the standout brand in the retailer’s portfolio and will make up between 55% and 60% of Foot Locker’s total sales mix by 2026.
Still, Donahoe also attributed the sneaker giant’s strong Q3 results to its Consumer Direct Acceleration (CDA) program, which involves zeroing in on DTC and digital channels and pulling out of some wholesale channels.
“Fueled by compelling product innovation, deep relationships with consumers and a digital advantage that fuels brand momentum, our proven playbook allows us to navigate volatility as we create value and drive long-term growth,” Donahoe said in a statement.
Moving forward, Nike said it expects wholesale revenue to moderate in the coming quarters, as a result of its reduced inventory commitments to help Nike and retail stores work through excess inventory.
Given the strong quarter, Nike raised its outlook for fiscal year 2023 and now expects reported revenue to grow in the high single-digits, up from the prior guidance of mid-single-digits. In Q4, revenues are expected to grow in the flat to low single-digits.
