Nike expects to discount more and wrestle with Pandemic-related disruptions in China, its most profitable market, as it forecasts first-quarter revenue below estimates.
The company's shares fell 3 per cent to US $107 after the bell.
Analysts are mixed on Nike's prospects in China this year, as strict COVID 19 lockdowns have been lifted in several of the country's major cities, as people cut down on spending and a penchant for home-grown brands such as Li Ning and Anta remain firm.
There is uncertainty surrounding additional COVID disruptions, which is why we are taking a cautious approach to Greater China, according to Matthew Friend, Nike Chief Financial Officer.
The company expects first-quarter revenue to be flat to slightly up, below estimates of a 5.1 per cent increase, according to Refinitiv IBES data.
Morningstar analyst David Swartz said the guidance was somewhat disappointing.
The recent re- opening of China has seen a flood of goods being shipped from warehouses to store shelves, which is why fashion retailers are stuck with piles of unsold stock.
As it discounts more to sell seasonal inventories that arrived late due to supply snarls, Nike said that its gross margins would be under pressure this year due to higher freight and product costs.
The company's inventories rose 23 per cent to US $8.4 billion at the end of May, as more of its products are in transit due to supply disruptions.
On a currency neutral basis, Nike forecasts that revenue in fiscal 2023 will increase in the low double digits percentage range.
Revenues in Europe, the Middle East and Africa beat estimates of US $12.23 billion for the fourth quarter.
A US $150 million charge related to the decision to exit Russia and the transition of business models in a few South American countries was made by Nike.