Nike stock slumps citing surplus inventory concerns

Despite an earnings beat, Nike shares are dipping amid news of surplus inventory and slimming margins.

Video transcript

DAVE BRIGGS: My play is Nike. Their shoes are on sale, and so, too, are their shares after plunging today following a disappointing earnings report after Thursday's close. They beat on the top and the bottom, but it's the inventory story, once again, continuing to rear its ugly head and the retail sector. Levels soaring 65% in North America, 44% overall.

Their CEO, John Donahoe, saying, quote, "We effectively have a few seasons landing in the marketplace at the same time." Nike stock hit 12 plus percent on the day and down nearly 50% year to date. Collateral damage to other stocks include Under Armour down more than 5%, Adidas down 4 plus percent, Dick's also down 6%. Lulu also falling more than 5%.

But Rachelle, back to Nike. They showed no drop, according to their CEO, and according to the report, in demand. You're telling me you're going to get Nike at 2020 levels, and it's not a good buy? Can't argue that this is a time-- again, there may be a little more pain to come, but in the long run, you're getting Nike with no drop in demand at 2020 prices.

RACHELLE AKUFFO: I mean, it's tough because, obviously, when you hear this tightness when it comes to what we're seeing with Nike, obviously, a beat on the top and the bottom. But this inventory, it's been, obviously, a common theme that we noticed because a lot of these retailers, they overbought when they were panicked about having enough inventory during the pandemic. And now they're stuck with all this extra inventory.

So when you have Nike starting to mark things down, especially in apparel, you wonder what, then, that means for some of these other brands as well, who maybe don't have such strong brand loyalty. So they're in a tough spot here. I think Nike is trying to weather the storm, but I'm surprised to see its confidence was not this much, Seana.

SEANA SMITH: Yeah, and I also think-- I mean, just looking at the Street's reaction, a number of banks still have buys on the stock, but they have lowered their price target as a result of today's drop. Morgan Stanley, Guggenheim, Stifel, RBC, all lowering their price target on the stock, citing those macroeconomic headwinds here over the coming quarters. But long-term, though, they do remain bullish on the stock. And a lot of the points, Dave, is because of what you just raised.

DAVE BRIGGS: Yeah, it looks like a quarter problem, not a fundamental problem, but we digress.