Nike shares slip despite upbeat Q3

The news shaping the markets today

The US announced plans to deliver Abrams tanks to Ukraine by autumn. The safe-haven US dollar index fell this morning.

Australia’s Westpac-Melbourne Institute Leading Economic Index declined 0.06% in February, easing from a 0.12% contraction in the previous month, which lent support to the AUD/USD forex pair.

New Zealand’s Westpac-McDermott Miller consumer confidence index increased to 77.7 in the first quarter, from a record-low of 75.6 in the prior period, sending the NZD/USD pair higher in forex trading this morning.

Argentina’s trade surplus shrank to $182 million in February, from $818 million in the year-ago period, exerting pressure on the ARS/USD forex pair.

US existing home sales climbed 14.5% to an annual rate of 4.58 million in February. The figure came in above market estimates of a 5% increase and sent the Dow Jones index higher by more than 300 points on Tuesday.

What’s happening: Shares of Nike fell in after-hours trading, following the release of results for its third quarter.

What happened: The sportswear brand boosted its revenue forecast for the full year after reporting upbeat quarterly results.

However, investors grew concerned after Nike reported a decline in sales at one of its major regions and warned of margin pressures.

How were the results: The company posted growth in sales for the quarter ended February 28.

• Revenue rose 14% year-over-year to $12.4 billion, which beat the consensus estimates of $11.47 billion.
• Earnings came in at 79 cents per share, exceeding Wall Street expectations of 55 cents per share.

Why it matters: The athletic footwear and apparel company reported strong demand for its sneakers, including fresh launches like LeBron 20, which helped the company increase its overall market share.

Nike Direct sales jumped 17% year-over-year during the quarter, while digital sales rose 20% and wholesale sales grew 12%.

The company saw some weakness in China, with sales in Greater China contracting around 8% during the quarter, despite the country easing its strict covid-19 restrictions.

Nike ended the quarter with cash, equivalents, and short-term investments worth $10.8 billion and inventories of $8.9 billion.

Its gross margin came in at 43.3%, below market estimates of 43.7%. Inventories rose 16% from the previous year after growing 43% in the prior quarter.

Nike expects its gross margins to contract by around 250 basis points in 2023, compared to its earlier forecast of a range of 200 to 250 basis points. Management guided to revenue growth in the high-single-digit range for the full year, versus their prior outlook of mid-single digits.

The company also projected fourth-quarter revenue growth of flat- to low-single-digits, versus expectations of 2.42%.

How shares responded: Nike’s shares fell 2.3% to $122.79 in after-hours trading, following the release of quarterly results. The stock has added around 27% over the past six months.

What to watch: Investors will keep an eye on the company’s inventory levels, which could impact its margins ahead.

The markets today

The British Pound will be in focus today ahead of inflation data from the UK

Context: The GBP/USD forex pair fell on Tuesday with some easing of concerns related to the banking sector.

Details: Equity markets in Europe moved higher for a second consecutive session, after experiencing sharp volatility over the last few weeks, following news of UBS Group’s acquisition of Credit Suisse.

Forex traders turned their focus back to rate expectations, with the US Federal Reserve scheduled to announce its decision today and the Bank of England scheduled to announce its money policy on Thursday.

Markets widely expect the BoE to announce another rate hike of 25 basis points, while there are growing speculations of policymakers holding interest rates unchanged.

On the economic data front, UK’s public sector net borrowing, excluding public sector banks, came in at £16.68 billion for February. This was the highest budget deficit on record for the month of February and was higher than market expectations of £11.4 billion.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, traded almost flat at 103.26 on Tuesday.

The GBP/USD pair fell around 0.5% to 1.2217 on Tuesday. The sterling lost around 0.9% to reach 88.15 pence against the euro.

London’s FTSE 100 gained 1.79% to close at 7,536.22 on Tuesday, notching its strongest session since November 2022. The domestically focused FTSE 250 added 1.54% to settle at 18,779.10.

What are expectations: Traders await inflation data from the UK today. The country’s annual inflation rate, which eased to 10.1% in January, is expected to decline further to 9.7% in February. Factory gate prices of goods produced by UK manufacturers is expected to rise 12.9% year-over-year in February, after January’s 13.5% gain.

Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.98%, 1.30% and 1.42%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

UK’s retail price index, PPI input and CBI industrial trends orders, South Africa’s inflation rate, Eurozone’s current account, Italy’s current account, US MBA Mortgage applications, gasoline stocks change, crude oil inventories, distillate stocks and Federal Reserve interest rate decision, Mexico’s consumer spending and GDP aggregate demand, Canada’s new housing price index, Argentina’s leading economic index, gross domestic product and unemployment rate, as well as Russia’s producer price inflation and consumer confidence.