• by Sarah Mahoney  @mahoney_sarah, March 22, 2023

In its latest financial results, Nike showed it's outrunning recent problems, as inventory woes and faltering sales in China continue to even out. And with the upcoming debut of Air Max Pulse and innovations at Jordan, it's finding new ways to solidify its hold on younger consumers.

For the third quarter of its fiscal year, revenues climbed 14% to $12.4 billion, a gain of 19% on a currency-neutral basis. Direct sales advanced 17% to $5.3 billion, with digital sales rising 20%. Wholesale revenues also improved, up 12%.

At Converse, sales rose 8% to $612 million, led by double-digit growth across all channels in North America.

Net income dropped 11% to $1.2 billion. Demand creation expenses increased by 8% to $900 million, primarily due to increased advertising and marketing expenses.

Those results beat analysts' expectations, as did its forecast of flat to low-single-digit sales growth in the year ahead.

"Nike made further progress on inventory and confirmed the Greater China recovery is underway," writes Jonathan Komp, an analyst who follows the company for Baird. "We believe Nike remains attractive given positive brand momentum and competitive positioning."

John Donahoe, Nike’s president and CEO, spent much of the recent earnings call talking about younger consumers and ways the company is rethinking product innovation to further build its portfolio of classics.

The upcoming launch of the Air Max Pulse is an example. While the Air Max franchise grew by double digits last quarter and the 270 has been a top seller for five years, Gen Z wanted something different.

"We heard from younger age groups that they want their version, a more street-engineered, durable shoe -- one with a new lifestyle identity," Donahoe said. "This is a future franchise for the next generation."

Another example is in Jordan, with the recent debut of the Tatum 1. "It represents an evolution for the Jordan brand, also serving the next generation," he said.

Nike took special care in the kids' and toddler versions, creating new easy-on and easy-off technology to meet the demands of young parents.

Still another innovation comes with the new Air Max 1 Design by Japan 87. This women's model marks the first time Nike created a shoe based on polling in the SNKRS app, and it developed the product in less than a year. Those participating will get the first chance to buy it, completing the company's first insights-to-shopping circle.

Observers are impressed by Nike's ability to overcome external challenges. "Even in an apparel industry characterized by high markdowns and sliding overall demand, Nike recorded 14% sales growth in the third quarter, well above our 7% estimate," writes David Swartz, an analyst who covers Nike for Morningstar.

That includes price hikes in the mid-single digits, "supporting our view that Nike's brand strength … is allowing it to raise prices when others can't," Swarts adds.