During the global pandemic, back when many individuals had to work from home for several months, sales of brands like Nike ( NYSE:NKE ) and Lululemon ( NYSE:LULU ) went through the roof.
From the start of 2020 to the end of 2020, Nike stock went up by 65%, and Lululemon stock went up by 69%.
But 2022 has been a very different year. Shares of Nike and Lululemon have dropped by 32% and 15%, respectively.
In this article, we’ll take a closer look at Nike, a company that did well during the pandemic boom but is now facing several problems as 2023 approaches.
Nike Is Facing Strong Headwinds
Nike has done a good job of switching to more direct-to-consumer sales, which can significantly affect the company’s gross margins.
Nike has also done an excellent job of building a global brand that connects all consumers worldwide.
On the other hand, the headwinds will make it more challenging for Nike to do better in 2023.
- Inventory increase
- Earnings revisions
- China risk exposure
Let’s start with the overabundance of inventory, a common problem for retailers in 2022. After a year of issues with the supply chain, the situation has changed: all the extra stock ordered has arrived, but demand has slowed.
Nike announced its fiscal Q1 results at the end of September. On a currency-neutral basis, sales went up 10%, but gross margins went down 220 basis points, which caused EPS to drop by 20%.
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