‘Cost’, ‘sale’ and ‘inventory’ sentiment down for Nike in Q3 2022 following supply chain issues, finds GlobalData

Mentions of ‘cost’ increased by 10% in Q3 2022 over Q3 2021 in Nike’s company filings while sentiment decreased by 26%, found GlobalData’s Company Filings Analytics Database. The leading data and analytics company found that sentiment of ‘sale’ and ‘inventory’ declined by 11% and 48% respectively along with the fall in mentions.

The company indicated that factors including supply chain disruptions, increases in wage-related expenses, strategic technology investments, and professional services costs, resulted in higher operating overhead expenses. Furthermore, demand creation expense rose primarily due to higher advertising and marketing expense. Consequently, the production cost of Nike’s inventory has increased.

Ekta Chourasia, Business Fundamentals Analyst at GlobalData, comments: “Due to store closures caused by COVID-19 and ongoing marketplace dynamics, Nike reported an overall decline in sales leading the company to indicate a 13% decline in revenue on a currency-neutral basis. Further, high product cost lowered the gross margin.”

In addition, factory closures in Vietnam and Indonesia impacted planned deliveries. Extended lead times and shifts in product flow because of ongoing supply chain volatility, led to a 44% growth in inventory levels during the quarter which unfavourably impacted the net change in working capital.

Chourasia adds: “As a result of lower revenues, gross margin contraction and higher selling and administrative expense, Nike indicated a 27% decline in earnings before interest and taxes (EBIT)*. Moreover, unfavourable changes in foreign currency exchange rates also impacted the company’s reported revenues and income.”

*Earnings before interest and taxes (EBIT) measures a company’s net income prior to the deduction of interest and income tax charges.

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