Nike beats sales expectations, misses on earnings as margins drop

Nike missed on earnings during its fiscal fourth-quarter for the first time in three years as the retailer reported lower margins that weighed on profits.

Shares dropped nearly 4% in extended trading.

Here’s how the sneaker giant performed during the quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

• Earnings per share: 66 cents vs. 67 cents expected
• Revenue: $12.83 billion vs. $12.59 billion expected

The company’s reported net income for the three-month period that ended May 31 was $1.03 billion, or 66 cents per share, compared with $1.44 billion, or 90 cents a share, a year earlier. Earnings came in below Wall Street’s expectations, in a rare miss for the retailer.

Sales rose to $12.83 billion, up about 5% from $12.23 billion a year earlier and ahead of Wall Street’s estimates. The company beat revenue estimates for the seventh straight quarter.

For its full fiscal year, Nike’s revenue was $51.2 billion, up 10% compared to the prior year. It beat analysts’ expectations of $50.99 billion, according to Refinitiv.

However, profits for the full year also came in below expectations. The athletic apparel retailer reported earnings per share of $3.23, just short of the $3.24 Wall Street had expected, according to Refinitiv. Nike’s net income for the year was $5.1 billion, down 16% compared to the prior year.

Investors have been eager to see if Nike managed to improve its bloated inventory levels, which have weighed on its margins. Inventories came in at $8.5 billion in the fourth quarter, flat compared with the prior-year period.

Nike’s gross margins fell again during the quarter. They dipped by 1.4 percentage points to 43.6%, but narrowly beat analysts’ expectations of 43.5%, according to StreetAccount. The company attributed the drop to higher product input costs, elevated freight and logistics expenses, higher promotions and unfavorable currency exchange rates.

Other retailers that reported earnings recently noted freight…