After reporting results for the quarter that exceeded expectations, Nike increased its full-year revenue outlook but issued a warning about margin pressures as it continues to aggressively discount excess inventory.

Strong demand for the company’s sneakers, including vintage designs like the Jordan Retro and more recent franchise releases like the LeBron 20, helped it increase its market share.

Nike reported a decrease in apparel inventory in the third quarter and anticipates “healthy” inventory levels at the end of the fiscal year in 2023.

The German company is anticipated to report its first annual loss in three decades this year as rival Adidas continues to struggle following its split from the musician formerly known as Kanye West.

After the company stated it anticipates a gross margin decline of approximately 250 basis points in 2023, at the low end of its previous forecast range, Nike’s shares dropped 2% in after-hours trading on Tuesday.

According to Nike’s efforts to offer steeper discounts in an effort to get rid of excess inventory, a strong U.S. dollar, higher freight costs, and other factors are continuing to put pressure on the company’s margins, said Matthew Friend, chief financial officer.

At the Brooklyn Museum in the Brooklyn borough of New York, an Air Jordan 1 is displayed with the iconic Nike swoosh and Air Jordan logo.

According to Jessica Ramirez, senior analyst at Jane Hali and Associates, Nike is in a much better position with inventories than it was in the previous six months.

Even though the country relaxed pandemic-related restrictions, which is expected to benefit the company in the near future, sales in Greater China fell by about 8%.

According to Morningstar analyst David Swartz, Nike’s recovery in China appears to be doing much better than Adidas’, which has been “falling apart” there.

In contrast to its previous prediction of growth in the mid single digits, Nike now anticipates reported revenue for the entire year to increase in the high single digit range.

According to IBES data from Refinitiv, the company anticipates flat to low-single-digit revenue growth in the fourth quarter versus forecasts of an increase of 2.42%.

Nike reported third-quarter revenue of $12.39 billion, exceeding estimates of $11.47 billion, and profit of 79 cents per share, exceeding estimates of 55 cents.

(Adapted from StreetInsider.com)