Shares of\u00a0Nike\u00a0plunged Friday after the retailer cut its full-year guidance and said it expects sales to drop 10% during its current quarter as it warned of soft sales in China and \u201cuneven\u201d consumer trends across the globe.<\/p>\n
The expected 10% first-quarter slump is far below the 3.2% drop that analysts had expected, according to LSEG.<\/p>\n
The sneaker giant now expects fiscal 2025 sales to be down mid-single digits, compared to analyst estimates of a 0.9% increase. Nike previously expected sales to grow. The company said Thursday it expects sales in the first half to be down in the high single digits, compared to previous guidance of declines in the low single digits.<\/p>\n
\u201cA comeback at this scale takes time,\u201d the retailer\u2019s finance chief Matthew Friend said on a call with analysts. \u201cAlthough the next few quarters will be challenging, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive sustainable, profitable, long-term growth.\u201d<\/p>\n
The company cut its guidance as it contends with slower online sales, planned declines in classic footwear franchises, \u201cincreased macro uncertainty\u201d in the Greater China region and \u201cuneven consumer trends\u201d across Nike\u2019s markets, Friend said. It also expects sales into wholesalers to be slower as it scales new innovations and pulls back on classic franchises.<\/p>\n
For the fiscal fourth quarter, the company handily beat earnings estimates as its cost-cutting efforts continue to bear fruit, but Nike fell short on revenue.<\/p>\n
The company\u2019s reported net income for the three-month period that ended May 31 was $1.5 billion, or 99 cents per share, compared with $1.03 billion, or 66 cents per share, a year earlier.\u00a0<\/p>\n
Sales dropped to $12.61 billion, down about 2% from $12.83 billion a year earlier.<\/p>\n
In fiscal 2024, Nike posted sales of $51.36 billion, which is flat compared to the prior year. It\u2019s the slowest pace of annual sales growth the company has seen since 2010, excluding the Covid-19 pandemic.<\/p>\n
Nike executives attributed the sales miss to a range of factors. They said its lifestyle business declined during the quarter and that momentum in its performance business, such as its basketball and running shoes, wasn\u2019t enough to offset it.<\/p>\n
Online performance was soft because Nike had a higher share of lifestyle products, more promotions and fewer sales of classic franchises, such as its Air Force 1. It also saw traffic in China decline across all channels beginning in April due to macro conditions in the region.<\/p>\n
Despite the traffic decline in China, sales in the region exceeded Wall Street expectations, according to StreetAccount, coming in at $1.86 billion, compared with estimates of $1.79 billion. It was the only geographical segment to top estimates for the period.<\/p>\n
Sales in North America, its largest market, came in at $5.28 billion, below StreetAccount expectations of $5.45 billion.\u00a0<\/p>\n
In Europe, Middle East and Africa, Nike posted revenue of $3.29 billion, compared to estimates of $3.32 billion.\u00a0In Asia Pacific and Latin America, Nike saw $1.71 billion in sales, compared to estimates of $1.77 billion.\u00a0<\/p>\n
Still, Friend later warned of the \u201csofter outlook\u201d in China and said had it not been for Chinese marketplace Tmall\u2019s early start to the region\u2019s 618 shopping holiday, sales in the country would\u2019ve fallen short of Nike\u2019s internal expectations.<\/p>\n
\u201cThe China marketplace remains highly promotional, and we continue to manage both Nike and partners\u2019 inventory carefully,\u201d said Friend. \u201cWhile our outlook for the near term has softened, we remain confident in Nike\u2019s competitive position in China in the long term.\u201d<\/p>\n
Nike\u2019s Converse brand was once again a significant underperformer in the overall results. The division saw revenue plunge 18% to $480 million, largely due to declines in North America and Western Europe.<\/p>\n
Over the last few months, the longtime leader of the sneaker and athletic apparel category has found itself in a rough patch, working to stay ahead of a slew of upstart competitors. Its revenue growth has slowed, it\u2019s been criticized for falling behind on innovation and it\u2019s in the process of walking back its direct-sales strategy, which failed to produce the results the company had anticipated.\u00a0<\/p>\n
Under the strategy shift, Nike had been working to drive sales through its own website and stores rather than through wholesalers like\u00a0Foot Locker, but it recently began walking back that initiative, telling CNBC in April that it\u00a0went too far\u00a0when it moved away from wholesalers.<\/p>\n
The strategy can be more profitable and gives companies better control over their brands and customer data, but it can also create logistical headaches and come with unexpected \u2014 and costly \u2014 hiccups.\u00a0<\/p>\n
During the quarter, Nike direct revenues came in at $5.1 billion, down 8% compared to the prior year period. Meanwhile, wholesale revenue was up 5% to $7.1 billion, reflecting Nike\u2019s change of heart on direct selling.<\/p>\n
According to some analysts, the company\u2019s focus on building out its direct sales strategy led Nike to take its eyes off of innovation \u2014 the main attribute that had long made the company stand out.\u00a0<\/p>\n
As the retailer churned out more and more old favorites, such as the Air Force 1, upstarts like On Running and Hoka wowed runners with brand new designs \u2014 and snatched them up as customers.\u00a0<\/p>\n
Nike has said that it would reduce the amount of products it had on the market in favor of new innovations and is betting that a suite of new styles, along with the 2024 Paris Olympics, can get the company back on solid footing.\u00a0<\/p>\n
During the company\u2019s conference call, CEO John Donahoe said Nike was accelerating its plans to reduce supply of classic franchises because the brands had performed poorly online, which is expected to affect fiscal 2025 revenue.<\/p>\n
\u201cWe are taking our near-term challenges head-on, while making continued progress in the areas that matter most to NIKE\u2019s future \u2014 serving the athlete through performance innovation, moving at the pace of the consumer and growing the complete marketplace,\u201d Donahoe said in a release. \u201cI\u2019m confident that our teams are lining up our competitive advantages to create greater impact for our business.\u201d<\/p>\n
Some of Nike\u2019s challenges are also outside of its control. It has contended with a rough macroeconomic environment that\u2019s seen consumers pull back on sneakers purchases, and it also may be finding itself on the wrong side of trends. Some analysts expect the overall athletic category to face a slowdown this year as\u00a0denim makes a comeback\u00a0with consumers and shoppers look to dress up after years of dressing down.\u00a0<\/p>\n
In the meantime, Nike has focused on cutting costs so it can at least deliver strong profits against unsteady sales.\u00a0<\/p>\n
In December, it announced a\u00a0broad restructuring plan\u00a0to reduce costs by about $2 billion over the next three years. Two months later, Nike said it was\u00a0shedding 2% of its workforce, or more than 1,500 jobs, so it could invest in its growth areas, such as running, the women\u2019s category and the Jordan brand.<\/p>\n<\/p>\n
Shares of\u00a0Nike\u00a0plunged Friday after the retailer cut its full-year guidance and said it expects sales to drop 10% during its current quarter as it warned of soft sales in China and \u201cuneven\u201d consumer trends across the globe. The expected 10% first-quarter slump is far below the 3.2% drop that analysts had expected, according to LSEG. […]<\/p>\n","protected":false},"author":0,"featured_media":5702,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-5701","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/5701","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=5701"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/5701\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/5702"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=5701"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=5701"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=5701"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}