Nike’s FQ1 GAAP EPS of $0.93 actually beat estimates by a symbolic $0.01. Revenue of $12.69 billion (+3.6% YoY) also exceeded expectations by $410 million. NIKE Direct sales were $5.1 billion, up 8% on a reported basis and up 14 percent on a currency-neutral basis.

Most importantly, a drop in revenue in Greater China (-16%) was offset by gains in Asia Pacific & Latin America (+5%), North America (+13%) and Europe, Middle East, & Africa (+1%). Footwear sales were up 17% to $3.81 billion, while apparel sales rose 4% to $1.49 billion. Nike Direct sales were $5.1 billion, up 8% on a reported basis and up 14% on a currency-neutral basis.

However, those reflected already significantly lower key numbers on an annual basis. Gross margin fell 220 b.p. to 44.3% of sales vs. 45.4% consensus. The margin drop was primarily driven by elevated freight and logistics costs, lower margins in the NIKE Direct business driven by higher markdowns, and unfavorable changes in net foreign currency exchange rates, including hedges, partially offset by strategic pricing actions. The overall decrease in margins was primarily driven by North America, which took measures to liquidate excess inventory through Nike Direct markdowns and wholesale marketplace actions.

Net income for the apparel giant fell 22% YoY to $1.5 billion.

NIKE Brand Digital sales increased 16% on a reported basis, or 23% on a currency-neutral basis, led by 46% growth of EMEA sales. Gross margin decreased 220 basis points to 44.3%.

Cash and equivalents and short-term investments were $11.9 billion, down approximately $1.8 billion from last year, as free cash flow was offset by share repurchases and cash dividends. Inventories for NIKE jumped to $9.7 billion, up 44% on an annual basis, driven by elevated in-transit inventories from ongoing supply chain volatility, partially offset by strong consumer demand during the quarter. Nike confirmed adherence to share repurchases of $1.0 billion, reflecting 9 million retired shares.

Conclusion. Nike’s business, although still sound while the brand is highly respected among the company’s fans, keeps suffering from lingering logistical problems and elevated shipping costs, – a very unfortunate combination of factors further amplified by USD strength currency impact.