Guidance or no guidance, the US inventory/sales/margin trajectory just inflected. #1 on our Long Best Idea List. 10Q read thru...
- We already knew that Nike North American margins were ‘up modestly’ last quarter, but the 10Q shows they were up 40bps.
- That’s fine. But what I REALLY care about is that the sales/inventory spread in NA just hit a +11% while margins inflected.
- This is one of the biggest gross margin setups Nike has had in the US in 4+ years.
- Yes, it still has issues – we know that – but guidance calls for another step down in consolidated gross margin. Co is blaming FX, but I think it is materially overstating the impact of the $.
Revenue should be inflecting, GM getting ‘less bad’, inventory in check, FX impact overstated…my only lingering concern is the weak (18%) ecomm comp in 3Q. (and it is a big concern of mine).
But all in, this trend is a big punch in the gut for the bears.
