Nike profits surpass analyst expectations despite higher prices

While some retailers have struggled to keep profits high as consumer spending slows, Nike has come out as somewhat of an outlier, surpassing analyst expectations for first-quarter profits, Reuters reported.

The retailer’s global revenue rose 2% year over year and its inventory was down 10% from a year ago. The wins happened even as the company increased its sneaker and apparel prices to combat declining demand.

Prior to the Q1 earnings report, investors were afraid Nike would eventually succumb to a steep discounting strategy, like several other retailers that have resorted to promotions to keep up with competitors.

While brands like Zara have also hiked prices, companies like Macy’s and Foot Locker recently “cautioned the market about weak consumer spending,” prompting the industry to rethink cutting prices.

“We have seen a gradual, steady increase in our Price Sensitivity index for apparel over the past year, suggesting consumers are gradually becoming more willing to walk away from potential clothing purchases because of higher prices,” Kayla Bruun, Morning Consult senior economist, previously told Retail Brew.

And while Nike’s customers seem to have taken its prices in stride, for most other middle-tier brands contemplating discounting in light of ebbing consumer demand, dynamic pricing may be a wiser strategy.

“Given the level of uncertainty in the economy and dynamics of the consumer, the best strategy will be to dynamically manage price, discounting, and inventory more closely than ever before,” Aaron Sorensen, partner, chief behavioral scientist, and head of business transformation at Lotis Blue Consulting told us last month. “[For example,] Zara is targeting the consumer who’s more likely to feel inflation, being agile and responding to economic indicators and consumer behavior is key.”