​In September, Nike said its inventories ballooned 44% to nearly $10 billion at the end of the first quarter and warned of weaker margins, stoking fears across the industry that consumers were cutting back on discretionary spending due to inflation.

“We believe the inventory peak is behind us as actions we’re taking in the marketplace are working,” Nike Chief Executive John Donahoe

While Nike’s inventory at the end of the second quarter declined about 3% sequentially, margins fell 300 basis points due to higher promotions and discounts.

Still, the decline was smaller than expected, according to analysts, thanks also to higher-priced new products such as the LeBron 20s and Nike Mercurial shoes.

“Nike offered promotions, but at the same time, they also pushed for new product without the promotion,” said Jane Hali & Associates analyst Jessica Ramirez

Nike’s sales in North America surged 30%, while those in China – where the business was recovering from lockdowns – fell only about 3%, following a 16% slump in the first quarter.

“We see Nike as a must-own discretionary stock heading into (2023),” Credit Suisse said.

The company’s shares, having fallen about 38% this year, touched an over six-month high of $119.18 in early trading.