Nike feels pressure for strong dollar and discounts

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Nike feels pressure for strong dollar and discounts

Nike has warned that its profits will continue to be squeezed by the strong dollar and discounts to cut its stockpile of goods.

The sportswear giant, which makes over half of its revenue outside North America, doubled how much it thinks the soaring dollar will hit its annual revenue to $4bn (£3.6bn).

Meanwhile, the firm’s inventories rose more than 40% a year ago.

After the announcement, Nike shares fell by more than 9% in extended trading.

“Headwinds from foreign exchange shifted significantly in the last 90 days as the trend of US dollar strengthening has accelerated,” Nike’s finance chief Matthew Friend said.

In its quarterly update to investors, the company said net income fell to $1.5bn in the three months to the end of August, down 22% compared to a year ago.

The firm said increased transport costs and higher markdowns had hit profit margins.

At the same time, overall inventories rose by 44% to $9.7bn as the number of goods in transit increased due to supply chain issues.

However, the company reported that its revenues rose to $12.7bn for the same period, beating Wall Street forecasts.

Analysts said demand for Nike’s brands, including Jordan and Converse, had slowed as shoppers cut back on spending due to the cost-of-living crisis.

“Higher inflation is driving up costs and reducing margins and discouraging consumers, especially now on splashing on highly discretionary items,” Hianyang Chan from consultancy Euromonitor International told the BBC.

Rival sportswear maker Under Armour and major US retailers like Target have also offered heavy discounts as their inventories rose in recent months.

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