Nike shares drop as US sales disappoint

Investors were worried that sales in China would disappoint, given the country's lacklustre economic recovery. In the event sales in China were the bright spot in Nike's quarterly report. Sales jumped 16% after three consecutive quarters of declines.

It was North America's performance that weighed on earnings and sales, where still-high inflation has led to consumers buying essential goods and reducing discretionary spending.

(Video Transcript)

Nike shares dropped more than 4% on the IG platform late in the session yesterday after the company reported its fiscal fourth quarter (Q4) numbers forecasting first quarter revenues below Wall Street estimates.

So the outlook was one of the reasons why we saw that negative swing to what was happening in the numbers. Investors were wire that sales in China would disappoint, given the country's lackluster economic recovery. This wasn't the case at all. Greater China was in fact a bright spot in Nike's quarterly report with sales jumping 16% after three consecutive quarters of declines.

Let's take a look at the numbers. As they came out late last night. It was the North American performance that weighed on earnings and sales where still-high inflation has led to consumers buying essential goods and reducing discretionary spending. Sales rising 5% in the region, the fourth quarter, the slowest in four quarters overall. It was a tepid report. Nike's fourth quarter revenue up to $2.8 billion, marginally beating estimates are $12.58 billion. Earnings came in at 66 cents a share, missing estimates by two cents.

Nothing exciting in terms of forecasts either. As Nike's chief executive said, the environment is going to continue to be promotional as the group's still struggling to get rid of excess inventories. Nike's gross margin fell 140 basis points to 43.6% in the fourth quarter.

Share price chart

Let's take a look at what's been happening on the share price chart. This builds in on the IG platform what we saw late last night with that drop that we saw in shares ending down 4.27%.

Nike expects revenue now to be between flat to up to low single digits in the first quarter compared with analysts' average expectations of a 5.8% rise. So you can see the outlook really dampening the situation for Nike, which is why we saw that drop late in the session yesterday on the IG platform that stock before more than 4% at the start of today's cash session.