What to Expect When Nike Reports Q2 Earnings Next Week

Coming off a quarter marked by inventory excesses and widespread promotions, Nike will likely report a hit to gross margin and profits when it reveals second-quarter earnings on Tuesday — as the company continues to discount portions of its merchandise such as apparel, analysts said. Nike ended Q1 with inventory up 44% over last year. The company also reported a 22% decrease in net income of $1.5 billion due to elevated freight and logistics costs, as well as higher markdowns in the Nike Direct business. Given the expected inventory clearing headwinds, analysts were cautious about the stock, noting that Nike’s short-term performance could likely take a hit. In a note to investors, Williams Trading analyst Sam Poser said to “remain on the sidelines due to ongoing lack of visibility” for fiscal year 2023. Weak sales in Nike’s basketball and the Air Max division and a highly competitive promotional environment will also impact results this quarter as well, Poser noted, adding that management will likely have a clearer view on the marketplace after the third quarter as inventory clears and sales in China recover. Despite the expected headwinds, analysts don’t expect a completely devastating quarter for Nike. According to a note from Morgan Stanley analysts,

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