(Source – MarketWatch)
Nike has revised its full-year forecast, predicting a 10% decline in sales for the current quarter due to weak performance in China. This anticipated drop is significantly greater than the 3.2% decrease analysts had forecasted. Consequently, Nike’s shares plummeted by about 11% during extended trading on Thursday.
For fiscal year 2025, Nike’s shares now anticipate a mid-single-digit decline in sales, a stark contrast to the 0.9% increase previously expected by analysts. The company’s new outlook reflects a challenging environment with expected sales declines in the high single digits for the first half of the year, compared to previous guidance of low single-digit decreases.
Financial Performance and Market Challenges
Despite beating earnings estimates for the fiscal fourth quarter, Nike fell short of Wall Street’s revenue expectations. For the quarter ending May 31, Nike’s shares reported earnings per share of $1.01, surpassing the expected 83 cents. However, revenue came in at $12.61 billion, below the anticipated $12.84 billion. This performance represents a slight decline from the $12.83 billion reported in the same quarter last year.
In fiscal 2024, Nike’s sales remained flat at $51.36 billion, marking the slowest annual sales growth since 2010, excluding the pandemic period. The company attributed the revenue miss to a slowdown in lifestyle sales and a lack of sufficient momentum in performance-oriented products such as basketball and running shoes.
Nike’s online sales also underperformed, impacted by a higher proportion of lifestyle products, more promotions, and fewer sales of classic franchises like the Air Force 1. Traffic in China decreased across all channels starting in April due to macroeconomic conditions, further dampening sales. Despite this, Nike’s sales in China exceeded Wall Street expectations, reaching $1.86 billion compared to the estimated $1.79 billion.
Nike’s Shares Sink After Warning About Sales
Strategic Adjustments and Future Outlook
In response to these challenges, Nike has revised its strategy. Chief Financial Officer Matthew Friend emphasized the need for time to achieve a comeback at this scale, noting that while the next few quarters will be tough, the company is confident in repositioning itself for long-term growth with a more balanced portfolio.
Nike is dealing with increased macroeconomic uncertainty in the Greater China region and uneven consumer trends across its markets. The company also foresees slower sales to wholesalers as it scales new innovations and reduces emphasis on classic franchises.
Despite the setbacks, Nike is committed to focusing on its competitive strengths, including performance innovation and consumer-centric strategies. The company plans to reduce its product range in favor of new innovations, banking on a suite of new styles and the upcoming 2024 Paris Olympics to regain solid footing.
CEO John Donahoe expressed confidence in the company’s direction, stating, “We are taking our near-term challenges head-on, while making continued progress in the areas that matter most to Nike’s future — serving the athlete through performance innovation, moving at the pace of the consumer, and growing the complete marketplace.”
Nike is also addressing external challenges beyond its control, including a tough macroeconomic environment and changing consumer trends. The overall athletic category is expected to slow down this year, with consumers shifting towards denim and dressier clothing options.
To mitigate these issues, Nike has implemented cost-cutting measures to maintain profitability amidst uncertain sales. The company announced a broad restructuring plan in December to reduce costs by about $2 billion over the next three years. Additionally, in February, Nike cut 2% of its workforce, over 1,500 jobs, to invest in growth areas like running, the women’s category, and the Jordan brand.
Nike’s strategy shift, aiming to balance direct sales with wholesale partnerships, is part of its broader effort to navigate these challenging times and set the stage for future growth.
