Positive read across to JD Sports on improving supply, strong demand and lower mark downs Nike beat Q3 expectations reporting Q3 EPS of 87c versus FactSet consensus at 71c. There had been downgrades ahead of the numbers reflecting well known inventory/supply chain issues last year, but Q3 results reflects Nike’s ability to navigate a volatile market helped by faster innovation and more flexible supply chain. According to management, ‘Marketplace demand continues to significantly exceed available inventory supply, with a healthy pull market across our geographies.’ Nike expects demand to remain strong in FY23, which supports our view that the athleisure market remains healthy. Nike Q3 Group revenues grew 5%, or 8% at constant FX, with North America revenues +9% and EMEA +13% at constant FX. Nike profitability benefitted from improvement in full price realisation and lower markdown throughout the marketplace in all geographies. We believe less discounting in the wider market should help underpin JD Sport’s ongoing profitability. Management commented that all Vietnam factories are fully open, operating in-line with pre-COVID volumes and production and forward demand plans. Inventory levels are expected to normalise in its Q4/1H23. Q3 wholesale revenues returned to growth, up +1% at constant FX. EMEA Wholesale revenue grew +10% led by stronger growth rates from its strategic accounts, which we believe bodes well for JD Sports European growth prospects in FY22. Nike reiterated how wholesale partners continue to play an important role in its marketplace strategy Having cut the number of wholesale accounts by more than 50% over the last 4 years, Nike discussed how it was moving on to the next phase with its new Wholesale partnership model. Management was adamant that its Wholesale partners continue to pay an integral role in its marketplace strategy, which will also drive healthy growth in its key Wholesale partners. Nike management explained how its partners help ‘authenticate the brand and then create the scale of distribution through a consistent consumer experience across a larger footprint.’ These comments should be reassuring and dispel concerns over disintermediation, and risk to JD’s supply, post Foot Lockers’ announcement that Nike was cutting its allocation from the autumn. Continued overleaf