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Nike’s excess inventory is opportunity for wholesalers

Nike warehouse
Image Source: Rei Imagine / Shutterstock.com

Despite displaying strong growth over the last year, Nike’s problems with excess inventory have persisted. This has partly been caused by supply-chain and market-based issues relating to Covid-19 lockdowns in China. Earlier this week, CFO Matt Friend also cited last year’s issues with Vietnam factory closures leading to this year’s inventory numbers appearing artificially inflated. Nike is still facing challenges in clearing this inventory, which has led to benefits for wholesale businesses.

Last quarter, Mr Friend described the company’s strategy for clearing excess inventory. Some of the factors blamed for this bloat in inventory included issues with delivery logistics for both Nike and retailers. At the time of the previous quarterly call in October, inventory was up 44%. In the most recent quarter, that figure is now 43%. With only a 1% decrease in the last quarter, Nike is still focused on aggressively clearing this excess stock. This excess inventory is still 14% above the 29% annual increase anticipated by Wall Street analysts at the start of the year.

This represents an ongoing opportunity for wholesale businesses to access these channels. In the earnings call, Mr Friend outlined the way in which the excess stock allowed Nike to meet wholesale demand for products. With the excess stock predominantly made up of apparel, retailers can capitalize on these open wholesale channels to purchase Nike products directly form the manufacturer.

The benefits of this excess stock were reflected in the increases in stock prices of sports apparel retailers who rely heavily on these wholesale channels. Matt Friend’s inventory announcement preceded stock increases of 4% for Foot Locker whilst Dick’s Sporting Goods saw a 3% stock increase in the after-hours trading window following the call. The increase likely reflects the consequent benefits to retailers as wholesalers see increases in access to Nike inventory.

As it stands, this benefits both Nike and wholesalers: Nike needs to clear the inventory, and wholesalers can meet the requirements for Nike products at competitive prices. However, the window of opportunity may be closing in the future. In the earnings call, Nike stated its aim of increasing operating margins substantially. Analysts have speculated that this would likely involve a move towards more direct sales, meaning that the current open channels to wholesalers may be constricted in the long-term.

Nike warehouse
Image Source: Rei Imagine / Shutterstock.com

Despite displaying strong growth over the last year, Nike’s problems with excess inventory have persisted. This has partly been caused by supply-chain and market-based issues relating to Covid-19 lockdowns in China. Earlier this week, CFO Matt Friend also cited last year’s issues with Vietnam factory closures leading to this year’s inventory numbers appearing artificially inflated. Nike is still facing challenges in clearing this inventory, which has led to benefits for wholesale businesses.

Last quarter, Mr Friend described the company’s strategy for clearing excess inventory. Some of the factors blamed for this bloat in inventory included issues with delivery logistics for both Nike and retailers. At the time of the previous quarterly call in October, inventory was up 44%. In the most recent quarter, that figure is now 43%. With only a 1% decrease in the last quarter, Nike is still focused on aggressively clearing this excess stock. This excess inventory is still 14% above the 29% annual increase anticipated by Wall Street analysts at the start of the year.

This represents an ongoing opportunity for wholesale businesses to access these channels. In the earnings call, Mr Friend outlined the way in which the excess stock allowed Nike to meet wholesale demand for products. With the excess stock predominantly made up of apparel, retailers can capitalize on these open wholesale channels to purchase Nike products directly form the manufacturer.

The benefits of this excess stock were reflected in the increases in stock prices of sports apparel retailers who rely heavily on these wholesale channels. Matt Friend’s inventory announcement preceded stock increases of 4% for Foot Locker whilst Dick’s Sporting Goods saw a 3% stock increase in the after-hours trading window following the call. The increase likely reflects the consequent benefits to retailers as wholesalers see increases in access to Nike inventory.

As it stands, this benefits both Nike and wholesalers: Nike needs to clear the inventory, and wholesalers can meet the requirements for Nike products at competitive prices. However, the window of opportunity may be closing in the future. In the earnings call, Nike stated its aim of increasing operating margins substantially. Analysts have speculated that this would likely involve a move towards more direct sales, meaning that the current open channels to wholesalers may be constricted in the long-term.

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