The company’s “uniquely strong” demand across its three brands, Nike, Jordan and Converse, helped Nike’s top-line results in the first quarter to arrive ahead of plan, more than offsetting foreign exchange headwinds. “While we expect this to have a transitory impact on gross margins this fiscal year, we believe this cost will be far outweighed by the benefit of clearing marketplace capacity to align seasonally relevant product, storytelling and retail experiences for the consumer.” “As a result, we are taking decisive action to clear excess inventory, focusing on specific pockets of seasonally late products, predominantly in apparel,” said Friend.

The 65 percent surge in North America inventory included 85 percent in in-transit inventory, reflecting a combination of late delivery for the past two seasons, plus early holiday orders on target to arrive earlier than planned and a prior year impacted by factory closures in Vietnam and Indonesia. As a result, we faced a new degree of complexity.” “At the same time, consumers are facing greater economic uncertainty, and promotional activity across the marketplace is accelerating, especially in apparel. “Then transit times began to rapidly improve with signals that further improvement may be coming,” added Friend. He said earlier orders from retailers driven by consumer demand and less predictable delivery timelines led to broad, elevated inventory levels across retail. “This quarter, it became clear to us that conditions in North America are shifting once again,” said CFO Matt Friend on an analyst call. The hike is attributed to elevated in-transit inventory from ongoing supply chain volatility.

Inventories ended the quarter ahead 44 percent year-over-year, including 65 percent in North America, its largest market. are down about 12 percent in mid-day trading Friday after the company reported better-than-expected results for the first quarter ending August 31 on healthy demand but warned that gross margins would remain under pressure through the year as promotions would be required to clear bloated inventories.

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