Nike reported mixed FY22 fourth quarter results. The athletic retailers fourth quarter revenues were USD 12.2 billion, down 1% compared to prior year and up 3% on a currency-neutral basis, beating slightly consensus expectations of USD 12.13 billion. North America revenue declined 5% YoY missing consensus estimate of USD 5.23. EMEA grew 9.1% to USD 3.25 billion (consensus USD 3.01bn) and Greater China declined 19% to USD 1.56 billion (estimate USD 1.74bn). Asia Pacific & Latin America (APLA) revenue were USD 1.68 billion, up 15% from a year ago, beating estimate of USD 1.57 billion. NIKE Brand Digital grew 15% on a reported basis and 18% on a currency-neutral basis, driven by double digit growth in APLA, North America and EMEA.

Nike's USD 0.90 earnings per share surprised to the upside beating analyst expectations of USD 0.82 by 9%. However, the earnings beat was the result of an USD 0.18 tax-rate-driven benefit. The well-anticipated fourth quarter Ebit (earnings before interest and taxes) miss materialized, coming in at USD 1.468 billion, USD 126 million below Street expectations on gross margin pressure. Gross margin decreased 80 basis points to 45.0% (consensus estimates 46.7%), primarily due to higher inventory (USD 8.42bn, +23% YoY, consensus USD 7.03bn) and elevated freight and logistics costs, partially offset by strategic pricing actions. 

The Board of Directors authorized a new four-year USD 18 billion share buyback program. The Company's new program will replace the current USD 15 billion program, which will be terminated in fiscal year 2023. 

Valuation: Nike currently trades at 25.7x P/E 23E, below its 5-year historical average of 28.5x and above the MSCI USA Textiles, Apparel & Luxury Goods Index (20.9x). On a 2023E EV/EBITDA basis, the stock is trading at 19.8x, below its 5-year average of 21.1x and above the MSCI USA Textiles, Apparel & Luxury Goods Index (15.9x). On a P/S 23E basis, the stock is trading at 3.4x, below its 5-year average of 3.5x and above the MSCI USA Textiles, Apparel & Luxury Goods Index (2.9x).                                                                        

We confirm our Buy rating.

Management Outlook

Looking ahead, Nike expect revenue for the FY23 to grow low-double digits and gross margins to be flat to declining by 50 basis points versus FY22, which equates to earnings of USD 3.35 to USD 3.60 per share. (consensus USD 4.29). While we see some conservatism embedded in this outlook, much of this downside risk appears to have been priced in in advance of the earnings print, as evidenced by the stock's -33.7% since the beginning of the year and a modest -3% move in after-market trading.