• by Sarah Mahoney  @mahoney_sarah, June 30, 2023

For the first time, Nike's annual sales topped $50 billion, and the company reported a 5% gain in its fiscal fourth quarter. But the company’s net earnings sank 28%, falling more than most observers expected. That marked the first miss in profits in the years, partly due to increased marketing expenses.

The Beaverton, Oregon-based company says fourth-quarter sales climbed to $12.8 billion. For the full year, sales rose 10% to $51.2 billion, with a powerful performance in the Jordan brand.

Net income dropped to $1.03 billion for the quarter, compared to $1.44 billion in the comparable period last year.

In its announcement, John Donahoe, Nike's president and chief executive officer, said the results capped a year of milestones.

"Nike's strong results make clear that our strategy is working," he said. "Our investment in innovation and digital leadership is fueling broad-based growth across our portfolio of brands as we create value by serving the future of sport."

Sales in direct channels rose 15% to $5.5 billion, while wholesale revenues slipped 2% to $6.7 billion.

The company spent $1.1 billion to build demand in the quarter, a 3% increase primarily due to sports marketing, advertising, and marketing expenses. Nike expects cost increases in that area to grow faster than sales as it invests in key global sports moments and product launches.

Converse's sales fell 1% to $586 million, with double-digit growth offset by European declines.

Nike’s apps continue to energize digital results. Its four mobile apps clocked more than 500 million visitors within the quarter.

"We're in the privileged position of being in consumers' pockets and on the home screens of their phones," Donahue said. "That's cherished real estate."

Industry observers were encouraged by the news that the company had improved its inventory, reducing the number of units in both footwear and apparel in the double digits.

Gabriella Carbone, an analyst who follows the company for Deutsche Bank, believes that signals relief in promotional pressure.

"We are encouraged by the company's commitment to driving full price growth, along with its ongoing execution within its DTC channel," she writes in her note, also touting strong consumer demand online and in stores in the fourth quarter.

In remarks on the company's earnings call, Donahoe called out a rare sports trifecta. "For the first time ever, all three of our brands were represented in the All-NBA First Team, with Luka and Jason from Jordan, Giannis from Nike, and rising star Shai Gilgeous-Alexander from Converse," he said. "This is an unprecedented accomplishment."