How did Nike get into this situation? Market capitalization cut in half due to unmanageable inventory

The market capitalization of Nike, a global sports brand, has been cut in스포츠토토 half in two years as inventory assets remain high despite discount sales due to the slump in the Chinese market. In the securities market, there is an opinion that buying at a low price is possible when Nike’s inventory adjustment is completed.

According to the U.S. stock market on the 11th (local time), Nike’s stock price fell 18.49% this year. Nike’s current market capitalization is $148 billion (about 196 trillion won), down 46.5% from the high point of $276.8 billion (about 377 trillion won) in 2021.

The decline in demand in the Chinese market, which has been a high-growth sector in Nike’s performance, appears to be holding back the stock price. Looking at Nike’s annual sales ratio by country, the United States is the highest at 33.3%, followed by China (15.1%). Nike’s sales in the Chinese market in the fourth quarter of this year (March to May) based on the U.S. fiscal year amounted to $1.81 billion, a decrease from the previous quarter ($1.994 billion). Sales in the Chinese market have been below $2 billion for six consecutive quarters since recording $2.16 billion in the third quarter of last year.

Nike found a breakthrough through discount sales to protect its performance, but as the slowdown in the Chinese market became a reality, inventory was piling up. Nike’s inventory assets in the fourth quarter of this year amounted to $8.4 billion, not decreasing at all compared to the same period last year ($8.4 billion). Inventory assets have been decreasing since peaking at $9.7 billion in the first quarter of this year, but are still significantly exceeding the average inventory over the past four years (approximately $7 billion).

As inventory increases, management costs naturally increase, which worsens cash flow. Companies also account for the increase in inventory by subtracting it from cash flow. If inventory continues to pile up, it leads to discount sales to clear inventory, which also leads to worsening profitability. Nike’s gross margin in the most recent quarter decreased by 140 basis points (1 basis point = 0.01 percentage point) to 43.6%. This is due to increased costs, including an 8% increase in selling and administrative expenses.

Therefore, the stock market is evaluating that it is possible to buy at a low price when Nike’s inventory adjustment is completed. Kim Jae-im, a researcher at Hana Securities, said, “The 24-year performance shows that inventory issues are resolved and the stock is ready for a clear rebound, so we believe the stock price has high potential to rise,” adding, “Because it is influenced by consumption trends, the overall industry inventory situation, and promotions, “Investors will likely want to first confirm the completion of inventory adjustments through future performance,” he said. Nike evaluated recent inventory levels as “stable ( Healthy ).”

It is positive that profitability is still superior to that of peers based on strong brand influence. Nike’s 12-month forward return on equity ( ROE ) was 39%, higher than that of Lululemon (36%), Guess (29%), and Puma (15%).

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