Nike Shares Down -12% During Market Open Due To Record High Inventory, Discounts Incoming?

Nike shares headed for their biggest drop since the early days of the pandemic after a glut of unwanted merchandise eroded the sportswear giant’s profitability because of a surge in inventory. The sportswear giant was forced to push through margin-busting discounts that hurt profitability.

Higher freight costs, markdowns, and foreign exchange effects (stronger dollar but weaker currency's in Europe and other Nations) weighed on profitability in the fiscal first quarter that ended August 31st, with gross margin of 44.3 percent coming in below Wall Street’s expectations. North American inventories surged 65 percent, and the footwear giant also downgraded its outlook for the full year on Thursday.

Demand for Nike's brands including Jordan and Converse has slowed as sneakerheads lose enthusiasm for discretionary products due to the cost-of-living crisis.

We're going to see substantial markdowns this year through the holiday season, this will be the best time for Nike to get rid of their high inventory.