Nike shoes and logo are displayed in a store in Nice, France on May 28, 2024.
Jakub Bolzycki | Noor Photos | Getty Images
shares Nike On Thursday, the retailer lowered its full-year guidance and said it expected sales to fall 10% in the current quarter, as the sneaker giant warned of weak sales in China and “unbalanced” global consumer trends.
The company now expects sales to decline by mid-single digits in fiscal 2025. The company had expected sales to grow. Nike also expects a high-single-digit sales decline in the first half, compared with previous guidance of a low-single-digit decline.
“A recovery of this magnitude takes time,” Matthew Friend, the retailer’s finance chief, said on a call with analysts. “With that in mind, we considered a number of factors and scenarios in revising our fiscal 2025 outlook. ”
Friend said the company lowered its guidance due to slowing online sales, fewer franchise plans for classic footwear, “increased macro uncertainty” in Greater China and “unbalanced consumer trends” across Nike’s markets. The company also expects sales to wholesalers to slow as new innovations scale up and classic franchises shrink.
Shares plunged about 11% in after-hours trading.
In its fiscal fourth quarter, the company handily beat profit expectations as cost-cutting efforts continued to bear fruit, but Nike’s revenue missed expectations.
Nike does this period Compared with Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: Adjusted $1.01, expected 83 cents
- income: US$12.61 billion, expected US$12.84 billion
The company reported net profit of $1.5 billion, or 99 cents a share, for the three months ended May 31, compared with $1.03 billion, or 66 cents a share, a year earlier.
Sales fell to $12.61 billion, down about 2% from $12.83 billion a year earlier.
In fiscal 2024, Nike’s sales were US$51.36 billion, the same as the previous year. This is the company’s slowest growth rate since 2010 (excluding the Covid-19 pandemic).
Nike executives attributed the poor sales performance to a number of factors. They said their lifestyle business declined in the quarter and that the momentum in its athletic footwear business, such as basketball shoes and running shoes, was not enough to offset the decline. Nike’s online sales were weak in April and May as its lifestyle products gained share. Traffic volumes in China also declined starting in April due to macro conditions in the region.
Despite lower traffic in China, sales in the region beat Wall Street expectations, reaching $1.86 billion, compared with expectations of $1.79 billion, according to StreetAccount. It was the only geographic region to achieve the highest expectations during the period.
Sales in North America, its largest market, were $5.28 billion, below StreetAccount’s forecast of $5.45 billion.
In Europe, the Middle East and Africa, Nike reported revenue of $3.29 billion, compared with expectations of $3.32 billion. In Asia Pacific and Latin America, Nike’s sales were $1.71 billion, compared with expectations of $1.77 billion.
Sneaker leader loses crown
Over the past few months, the longtime leader in the sneaker and athletic apparel categories has found itself struggling to stay ahead of a host of upstart rivals. Its revenue growth has slowed, it has been criticized for lagging on innovation and it is abandoning a direct-sales strategy that failed to produce the results the company expected.
Under the strategy shift, Nike has been focusing on driving sales through its own website and stores rather than through wholesalers like this Foot cabinetbut it has recently begun to backtrack on that move, telling CNBC in April that it had gone too far in moving away from wholesalers.
This strategy can be more profitable and give companies more control over their brand and customer data, but it can also create logistical problems and lead to unexpected and costly problems.
This quarter, Nike’s direct revenue was US$5.1 billion, down 8% from the same period last year. Meanwhile, wholesale revenue grew 5% to $7.1 billion, reflecting Nike’s changing attitude toward direct sales.
Some analysts say the company’s focus on developing a direct-sales strategy has diverted Nike’s attention away from innovation, which has long distinguished the company.
As retailers roll out more and more old favorites like the Air Force 1, upstarts like On Running and Hoka are winning over runners with fresh designs and attracting them as customers.
Nike said it would reduce the number of products on the market in favor of new innovations, betting a series of new styles and the 2024 Paris Olympics could put the company back on its feet.
“We are meeting the near-term challenges head-on while continuing to make progress in the areas most important to Nike’s future – serving athletes through performance innovation, following consumers and growing the overall market,” CEO John Donahoe said in a statement. said a press release. “I believe our team is integrating our competitive advantages to create greater impact for our business.”
Some of the challenges Nike faces are also beyond its control. The company has been dealing with a tough macroeconomic environment that has seen consumers buy fewer sneakers, and it may also find itself on the wrong side of the trend. Some analysts expect the overall sports category to face a slowdown this year as denim makes a comeback and consumers look to dress up after years of casual wear.
Meanwhile, Nike has been working to cut costs so it can at least deliver strong profits amid erratic sales.
In December, the company announced a broad restructuring plan to cut costs by about $2 billion over the next three years. Two months later, Nike said it would cut 2% of its workforce, or more than 1,500 jobs, so it could invest in growth areas such as running, the women’s category and Jordan Brand.
—Additional reporting by CNBC’s Sara Eisen and Jessica Golden
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