Nike shoes and logo are seen at a store in Nice, France on May 28, 2024.
Jakub Borzicki | NoorPhoto | Good pictures
Nike It posted its slowest annual sales growth in 14 years on Thursday, excluding the Covid-19 pandemic, which led the sneaker giant to lower its current-year outlook as it warned of “challenges”.
“We are driving better balance across our portfolio. We are encouraged by our progress and our fourth-quarter results highlight the challenges that led us to update our fiscal ’25 outlook,” chief financial officer Matthew Friend said in a news release. “We are taking steps to make NIKE more competitive and drive sustainable, profitable long-term growth.”
Nike’s exact direction is unclear. The retailer typically releases its guidance during its earnings call, which is scheduled for 5 p.m. ET.
Last quarter, the company said it expected revenue and earnings to grow in fiscal 2025, but did not say by how much. It said its expected earnings for the first half of fiscal 2025 would be in the low single digits, reflecting “a subdued macro outlook globally.”
Shares fell about 6% in extended trading.
In the fiscal fourth quarter, the company easily beat revenue estimates as its cost-cutting efforts continued to pay off, but Nike fell short of earnings estimates.
Here’s how Nike did it In the period Compared to what Wall Street expected, based on LSEG’s survey of analysts:
- Stock Gains: $1.01 adjusted vs. 83 cents expected
- Revenue: $12.61 billion and $12.84 billion expected
The company’s net income for the three months 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.
Sales fell to $12.61 billion, down 2% from $12.83 billion a year earlier.
For fiscal 2024, Nike posted sales of $51.36 billion, flat from the previous year. Barring the Covid-19 pandemic, this is the slowest pace of growth the company has seen since 2010.
Nike executives attributed the sales failure to a variety of factors. They said its lifestyle business slowed in the quarter, and the momentum in its performance business, such as basketball and running shoes, wasn’t enough to offset that. It saw weakness in online sales in April and May as it had a higher share of lifestyle products. Traffic in China has slowed since April due to macro conditions in the region.
Despite the decline in traffic in China, sales in the region beat Wall Street expectations, coming in at $1.86 billion compared to estimates of $1.79 billion, according to the Street Account. It is the only geographic division with a better rating for that period.
Sales in its biggest market, North America, were $5.28 billion, beating Street estimates of $5.45 billion.
In Europe, the Middle East and Africa, Nike posted revenue of $3.29 billion compared to estimates of $3.32 billion. In Asia Pacific and Latin America, Nike saw sales of $1.71 billion compared to estimates of $1.77 billion.
The sneaker leader loses his crown
Over the past few months, the longtime leader of the sneaker and athletic apparel division has worked to stay ahead of many high-profile competitors. Its revenue growth has slowed, it has been criticized for lagging behind innovation and the company is in the process of scaling back its direct-selling strategy, which failed to deliver the expected results.
Under the strategic shift, Nike is selling through wholesalers instead of conducting sales through its own website and stores. Foot LockerBut it recently began scaling back that initiative, telling CNBC in April that it went too far when it pulled away from wholesalers.
This strategy can be more profitable and give companies better control over their brands and customer data, but it can create logistical headaches and come with unexpected — and costly — hiccups.
For the quarter, Nike direct revenue came in at $5.1 billion, down 8% from the year-ago period. Meanwhile, total sales revenue rose 5% to $7.1 billion, reflecting Nike’s shift to direct sales.
According to some analysts, the company’s focus on developing its direct sales strategy led Nike to take its eyes off innovation — a key attribute that has long made the company great.
As the retailer released more and more old favorites like the Air Force 1, upstarts like On Running and Hoka surprised runners with brand new designs — and wooed them as customers.
Nike has said it will reduce the amount of products on the market in favor of new innovations, and a collection of new styles with the 2024 Paris Olympics could put the company back on a solid footing.
“We continue to advance in the areas most important to Nike’s future – serving athletes through performance innovation, moving at the speed of consumers and growing the complete market,” said CEO John. Donahoe said in a statement. “I believe our teams are deploying our competitive advantages to create greater impact for our business.”
Some of Nike’s challenges are out of its control. It’s struggling with a tough macroeconomic environment that’s seen consumers shying away from new sneakers, and it may find itself on the wrong side of trends. Some analysts expect the overall athleisure segment to face a slowdown this year as denim consumers and shoppers look back on years of wear and tear.
Meanwhile, Nike is focused on cutting costs so it can at least deliver strong profits against volatile sales.
In December, it announced a sweeping restructuring plan to cut costs by about $2 billion over the next three years. Two months later, it said it would cut 2% of its workforce, or more than 1,500 jobs, so it could invest in its growth areas such as running, the women’s division and Jordan Brand.
— Additional reporting by CNBC’s Sarah Eisen and Jessica Golden.
