Sports retailer Nike (NKE) is going on sale as it faces less-than-ideal conditions of excess inventory and falling share prices.
The company said its inventory levels rose 65% in North America, its largest market, and 44% overall last quarter from a year ago. This comes on the back of a rocky 2021 when the sports retail giant was battling an inventory shortage. Now, however, the company has too much inventory on its hands, particularly clothing.
Last year, Nike’s factories in both Vietnam and Indonesia were shut down due to COVID outbreaks, which led to delays, Donahoe said. However, as production picked up, multiple orders arrived at once. He added that the company still has some merchandise orders on the way.
“We effectively have a few seasons landing in the marketplace at the same time,” CEO John Donahoe said on a call with analysts Thursday.
While supply chain problems have shown signs of improving, inflation pressures mean consumers are frugal. Other major retailers, like Target (TGT) and Walmart (WMT) have also reported outsized inventories this year.
Nike’s stock fell over 11% by midday Friday. In a bid to push out unwanted inventory, Nike will look to send goods to its factory outlets, promote online and boost sales to discount stores such as TJ Maxx. However, in recent years, the company has been steering away from discount vendors.
Donahoe remains confident of the company braving the storm.
“We see strong consumer demand in North America currently,” Donahoe said.
“There’s no signs of any softness.”
With Halloween, Thanksgiving and the holiday season just weeks away, shoppers can expect plenty of discounts to go around.
