Again, let's haven't look at Nike shares and sleeping back in the late session after profitability fell shy of expectations. Joining us now to discuss all this is Punam Goyle, senior US e commerce and retail analysts of bloom Big Intelligence. Okay, profitability fell shy of expectations, but what about profits? Yeah, you know, it comes back really to the inventory question, and that's a question not just for Nike but across
all of retail today. Inventories are very, very high. We saw that reported inventories were up forty pc in the quarter, but when you look at North America, which is where most of the pain was or I'd say, like all the pain, inventory was up sixty five percent, and in transit inventory was up. So there's more profit margin shortfall in the near term, especially in their fiscal two que
as they wind down on some of these inventory positions. Yeah, they mentioned that that sales were actually pretty good, particularly in North America, but sales falling in the Greater China region. I guess part of that's understandable because of the lockdown, but there's there's no real sign that that will get any better anytime soon. You're absolutely right. The North America optick was all driven by promotions. I mean, that's what
drove the increase. So not a great sales number when you look at how it was driven largely through promotional activity. And China it's it's, you know, a moving situation. No one really knows when he'll get better. It was interesting to see them say that as conditions improve, when they improve, they do see underlying demand for the brand and that the brand heat remains strong. But once again, that could take a quarter to unfold or over a year to unfold.
Um So, China still remains an influx situation and one that we're watching very closely. But um, I mean you look at gross margins, I think forty four center there about. That's a pretty healthy number, although off of course the highs we've had, But you know what is going on with that side of things. Yeah, it's for the near term, gross margins are going to be pressured, especially in this fiscal year with the largest UM downside expected in two que.
But if you look over the longer term, there is opportunity for them to still expand that number because, as you know, they're making a shift from wholesale to digital and as they boot boost their DTC penetration, they're going to have a higher mix of better quality margins. That coupled with their continuous innovation pipe price selling across the new products is also going to help um just boost
those gross margins. Yeah, that's the direct to consumer sales up as it was as good sign because as you say, that can help on the on the expenses side. I'm kind of curious what you think. I mean, the stock was just absolutely hammered and after hours trading. I know liquidity is sometimes a bit less than but let me just have a look here. I think it's down nine and a half percent, nine point and after hours trading. Uh, that suggests that investors were very cool to this, uh
this release. Yeah, I think in general, investors are concerned about the macro conditions that could really swing demand in the coming quarters. Right, we don't know when and if we will enter a recession, how deep it will be. Consumers are still being seen to spend today, but could that materially change, especially as we go into the largest selling periods of the year. Right, Remember holiday is upon us right in a few months, so we'll demand weekend.
Then there'll be an even bigger problem. So I think there's a lot of uncertainty in the macro that's keeping investors on the sidelines. You know things you covered this industry group. What the noise come out of Nike here, How is that being replicated elsewhere or isn't it? And you know, how would you really at the moment view what's going on on main street with regards to retail.
I shouldn't really talk about mainstream because of course you cover e commerce as well, but just about retail generally. And is it a polarization still abslutly, this is not a Nike only situation. We were at the v from Resterday yesterday and you know, they two provided a pretty bleak outlook in the near term, and we've heard it across other retailers, whether it's e commerce or others. No one knows where the macro is going. So the expectation is that the consumer will soften to what extent is
the biggest question. And I think until we have that answer, there could be continued risk in the consumer space, especially across discretionary spending. Yeah, I suppose if you see you know, people losing jobs and edging toward recession, they'll have to cut prices even more to stimulate sales, right, so um it does as questions about future profitability absolutely yeah. Okay, well, Punam,
thank you very much for joining us. Punham Goyle, Senior US e Commerce and retail analyst at Bloombrigg Intelligence