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World's largest sports company: Nike has to sell sports clothes because of overcrowded warehouses


Inflation drives up the prices for many consumer goods, but Nike has to get rid of its clothes cheaply: The world's largest sports group is sitting in overcrowded warehouses. The reason is a miscalculation.

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Nike store in San Francisco: Increasing procurement and delivery costs


Nike is in a difficult situation: The business of the world's largest sporting goods group is being slowed down by increased logistics costs and the strong dollar.

At the same time, goods are piling up in the warehouses.

As a result, Nike has to offer high discounts, especially in North America.

The group had filled its own warehouses – like its competitors Under Armour, Adidas and Puma in the USA – before school started after deliveries from Asia had been uncertain in recent years.

But this time the supply chains functioned surprisingly smoothly.

The result: The goods piled up on the shelves, stocks swelled by 44 percent to 9.7 billion dollars, in North America even by almost two thirds.

Subsequent rebates, rising procurement and delivery costs, and the strong dollar pushed net income down 22 percent to $1.47 billion in the first quarter (ended August), although currency-adjusted sales rose 10 percent to $12.7 billion.

CFO Matt Friend warned that exchange rate movements alone would weigh on Nike's fiscal year sales by $4 billion and operating profit by $900 million.

The misery is likely to keep Nike busy for a long time: The price pressure will be strongest in the autumn quarter, in which the Christmas business in the USA already begins, the US group said.

Adidas may also be affected

In addition, the strong dollar makes foreign earnings appear lower on the balance sheet when converted into US currency.

The quarterly figures were above the expectations of the analysts.

However, investors dumped the stock.

In after-hours trading, Nike shares fell by up to ten percent, in Frankfurt they were 10.5 percent lower on Friday at EUR 88.25.

That also pulled the German competition down.

Adidas shares fell 3.5 percent to an annual low of 119 euros, Puma shares even gave way almost five percent to a good 48 euros.

Credit Suisse analysts said Adidas had a similar problem with full inventory as Nike.

The question is whether sales in the second half of the year will increase strongly as hoped.

Stifel analysts expect Adidas and Puma to confirm their guidance for 2022 after the third quarter.

Nike had already reduced prices in the summer.

Inventories rose particularly sharply in North America.

The situation was completely different at the peak of the corona pandemic: Nike had to deal with delivery bottlenecks.

The group is going "resolutely" in order to reduce the surplus, said CFO Friend.

Source: spiegel

All business articles on 2022-09-30

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