People walk past a store of the sporting goods retailer Nike Inc. at a shopping complex in Beijing, China March 25, 2021.Like other retailers, Nike has struggled with inflated inventory levels that arose from supply chain disruptions, rising consumer demand and unpredictable in-transit shipping times.
In the quarter, inventories were up 42% to $9.3 billion. Nike's gross margin was reduced to 42.9% from 45.9% as a result of the merchandiseglut.
The company saw a 10% increase in selling and administrative expenses to $4.1 billion, mostly due to advertising and marketing costs and investment in Nike Direct.
The investment has paid off despite the focus on Nike Direct. Digital sales were up 25% for the quarter. For the last several quarters, wholesale revenue has been stagnant, but it was up for the quarter.
Nike's sales in China, its third biggest market by revenue, dropped by 3% compared to last year as the country deals with Covid lockdowns and a slower retail spending. According to the National Bureau of Statistics of China, retail sales fell in November compared to a year ago.
After earnings from Nike's fiscal first quarter were released in September, executives said the company enacted an aggressive promotional strategy to liquidate the merchandise and make room for new products.
Nike had a plan to shift its sales to consumers and away from wholesalers by improving the in-store experience and encouraging customers to shop directly from the company online.
The Italian locale well known for its designer shoe stores was the location of the new Nike store.
The initiative shows how Nike is trying to grow as a direct-to-consumer brand.
The sneaker brand's first-of-its-kind retail experience has a built in members lounge and will include interactive shopping experiences tailored to fans of the renowned sneaker brand.
You can read the earnings release here.
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