Shares in Nike Inc. (NYSE: NKE) dropped dramatically following the release of the company’s latest financial results, which revealed weaker-than-expected sales for the most recent quarter and a downgraded outlook for the year ahead. The world’s largest sportswear manufacturer saw its shares fall nearly 20% in Friday’s session.
Revenues for the direct-to-consumer (DTC) segment fell 8% to $5.1 billion, while overall revenues dropped 2% to $12.6 billion. The Converse brand was particularly affected, with sales declining 18%.
Despite these setbacks, Nike’s earnings per share of 99 cents exceeded analysts’ expectations by nearly 20%. Year-over-year, sales fell 1.7%, but net income surged by 45%.
Matthew Friend, Nike’s Chief Financial Officer, highlighted the challenges in the fourth-quarter results, stating that the company is taking “aggressive” steps to reorganize inventory both in its stores and digital channels due to slowing demand for lifestyle products.
“Our fourth-quarter results highlighted challenges that led us to update our full-year outlook,” Friend said.
Nike’s strategic shift and cost-saving measures, including a $2 billion plan announced in December, have not been enough to counteract the declining demand. This strategic pivot, which focuses on direct-to-consumer and digital sales, marks a departure from pre-pandemic strategies.
John Donahoe, Nike’s Chief Executive Officer, reassured analysts on a conference call, saying, “The headcount dimension of the save-to-invest plan is behind us. And now those teams are focused on driving for consumer innovation and execution.”
However, Nike has faced increasing competition from smaller, rapidly growing brands like Hoka and On. These competitors have gained market share, particularly in the wholesale running category, where Nike has traditionally been dominant.
Geographically, Nike reported significant declines in the greater China region, where brick-and-mortar traffic fell by double digits compared to the previous year. Trends in Europe, the Middle East, and Africa were described as “uneven.”
The company now expects a 10% drop in revenue for the current quarter and a mid-single-digit percentage decline in revenue for the 2025 fiscal year, which began in June.
Despite these challenges, Nike remains optimistic about its future. The company is banking on new products and a high-profile marketing campaign during the upcoming 2024 Paris Olympic Games to regain consumer momentum.
“The Paris Olympics offers us a pinnacle moment to communicate our vision of sport to the world,” Donahoe noted on the earnings call.
Nike continues to maintain a strong presence in the sportswear market through high-profile sponsorships. The company is the leading sponsor at the UEFA Euro 2024 football tournament, sponsoring nine national teams, including England, France, and Portugal.
Information for this briefing was found via Financial Times, BBC, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
