Coming off strong second quarter results in North America, bolstered by strong full-price footwear sales and growing momentum in its digital business, Nike is intent on getting to a healthy inventory position in the region by the end of its fiscal year on May 31. Units declined low-double digits in Q2 ended Nov. 30 from the end of Q1 and apparel units declined in the low teens from the prior period. Inventory buys for H2/FY23 were tightened during Q1.

Meanwhile, supply chain transit times continue to improve, making for a more predictable flow of supply, Nike senior management told analysts yesterday afternoon. This trend is giving Nike’s wholesale partners the ability to pull from available inventory to meet consumer demand for the first time in approximately six quarters. 

In Q2, Nike’s North American revenues rose 31 percent on a constant currency basis to $5,830 million from $4,477 million. Footwear sales increased 39 percent to $3.96 billion; apparel sales climbed 14 percent higher to $1.69 billion; and equipment sales increased 26 percent year-over-year to $182 million. 

Total period global revenues rose 17 percent on a reported basis to $13.3 billion but net income came in flat at $1,331 million versus $1,337 million. Direct sales rose 23 percent and digital revenues increased 31 percent on double-digit growth in traffic. Gross margin slipped 300 basis points to 42.9 percent, largely on markdowns in the North American market and higher freight and input costs that were partially offset by strategic price increases. 

Nike’s current FY outlook calls for low teens (mid-single digits on a reported basis) constant currency revenue growth with Q3 sales higher than those in Q4 as gross margins slip 200-250 basis points on ongoing liquidations. H2 currency headwinds are estimated at 700 basis points. Senior management, citing unabated macro concerns for consumers for its conservative H2 outlook.