Nike to Increase Promotions to Clear Out Inventory
Nike reported last week a 44 percent increase in inventory compared to the prior year period, driven by an increase in inventories from ongoing supply chain volatility. As a result, the sportswear brand plans to ramp up discounting and promotions to clear out some of its $9.7 billion in footwear and apparel before the holidays.
On a call with analysts last week, Nike executives said inventory peaked in the quarter for several reasons, including late product arrivals for the last three seasons because of the pandemic. Nike also ordered, and received, holiday merchandise early. Added to that, executives said inventory a year ago was lower than normal because of factory closures.
Nike has already started discounting products, mostly focusing on offseason apparel. It hopes to clear out older merchandise in time for the holiday season.
Total Retail's Take: Nike isn't the only company dealing with elevated inventory levels. Target, Walmart, Best Buy, Kohl's, Ulta, and Gap are among other large retailers working through excess inventory that they have stockpiled this year to try to mitigate supply chain challenges faced during the early days of the pandemic and were then faced with slowing consumer demand, Nike, like its fellow retailers, are offering promotions as way to quickly move inventory. Nike's announcement is particularly important, according to analysts, because the brand's negative update could mean that margin pressure across the broader retail sector is likely to be worse than feared.
