Investors have been watching to see if Nike's gross margins improve from its direct-to-consumer channels.
Nike, like other retailers, has been in the process ofbrought on by supply chain disruptions and shifting consumer demands that's been weighing on its margins.
While Nike CEO John Donahoe told investors last quarter he believes the company is past its inventory peak, gross margins were expected to take a hit during the holiday quarter as the company continued liquidation efforts and promotions. For the last several years, Nike has been working to build out its direct to consumer sales and has invested heavily in the channel by building out experiential stores, developing its loyalty program and growing its e-commerce sales. Along the way, it cut ties with a host of wholesalers but ended up relying on those partnerships during the last quarter to offload its bloated inventory.and revitalized relationship with Nike, its biggest brand partner.
Nike, which has consistently beat Wall Street's top and bottom line expectations over the last year, has been looking to see a rebound in sales in China, its third biggest market by revenue, as the region recovers from the Covid pandemic. Sales in China have been soft as consumers contended with sweeping lockdowns and rising infections but during the quarter, the country rescinded its zero Covid policy.
A study of consumers in China and North America conducted by Citi found the region is recovering but consumers aren't back to pre-pandemic shopping levels just yet.
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