Nike shares plunge after retailer says quarterly sales will fall 10%, warns on China weakness

Shares
of


Nike
plunged
on
Thursday
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
“uneven”
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.

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
also
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.

“A
comeback
at
this
scale
takes
time,”
the
retailer’s
finance
chief
Matthew
Friend
said
on
a
call
with
analysts.
“Although
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.”

The
company
cut
its
guidance
as
it
contends
with
slower
online
sales,
planned
declines
in
classic
footwear
franchises,
“increased
macro
uncertainty”
in
the
Greater
China
region
and
“uneven
consumer
trends”
across
Nike’s
markets,
Friend
said.
It
also
expects
sales
into
wholesalers
to
be
slower
as
it
scales
new
innovations
and
pulls
back
on
classic
franchises.

Shares
plunged
roughly
11%
in
extended
trading.

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.

Here’s
how
Nike
did

during
the
period
compared
with
what
Wall
Street
was
anticipating,
based
on
a
survey
of
analysts
by
LSEG:

• 
  Earnings
  per
  share:
  $1.01
  adjusted
  vs.
  83
  cents
  expected
• 
  Revenue:
  $12.61
  billion
  vs.
  $12.84
  billion
  expected

The
company’s
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. 

Sales
dropped
to
$12.61
billion,
down
about
2%
from
$12.83
billion
a
year
earlier.

In
fiscal
2024,
Nike
posted
sales
of
$51.36
billion,
which
is
flat
compared
to
the
prior
year.
It’s
the
slowest
pace
of
annual
sales
growth
the
company
has
seen
since
2010,
excluding
the
Covid-19
pandemic.

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’t
enough
to
offset
it.

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.

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.

Sales
in
North
America,
its
largest
market,
came
in
at
$5.28
billion,
below
StreetAccount
expectations
of
$5.45
billion. 

In
Europe,
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
$1.71
billion
in
sales,
compared
to
estimates
of
$1.77
billion. 

Still,
Friend
later
warned
of
the
“softer
outlook”
in
China
and
said
had
it
not
been
for
Chinese
marketplace
Tmall’s
early
start
to
the
region’s
618
shopping
holiday,
sales
in
the
country
would’ve
fallen
short
of
Nike’s
internal
expectations.

“The
China
marketplace
remains
highly
promotional,
and
we
continue
to
manage
both
Nike
and
partners’
inventory
carefully,”
said
Friend.
“While
our
outlook
for
the
near
term
has
softened,
we
remain
confident
in
Nike’s
competitive
position
in
China
in
the
long
term.”

Nike’s
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.

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’s
been
criticized
for
falling
behind
on
innovation
and
it’s
in
the
process
of
walking
back
its
direct-sales
strategy,
which
failed
to
produce
the
results
the
company
had
anticipated. 

Under
the
strategy
shift,
Nike
had
been
working
to
drive
sales
through
its
own
website
and
stores
rather
than
through
wholesalers
like


Foot
Locker,
but
it
recently
began
walking
back
that
initiative,
telling
CNBC
in
April
that
it

went
too
far
when
it
moved
away
from
wholesalers.

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
—
and
costly
—
hiccups. 

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’s
change
of
heart
on
direct
selling.

According
to
some
analysts,
the
company’s
focus
on
building
out
its
direct
sales
strategy
led
Nike
to
take
its
eyes
off
of
innovation
—
the
main
attribute
that
had
long
made
the
company
stand
out. 

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
—
and
snatched
them
up
as
customers. 

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. 

During
the
company’s
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.

“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,”
Donahoe
said
in
a
release.
“I’m
confident
that
our
teams
are
lining
up
our
competitive
advantages
to
create
greater
impact
for
our
business.”

Some
of
Nike’s
challenges
are
also
outside
of
its
control.
It
has
contended
with
a
rough
macroeconomic
environment
that’s
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

denim
makes
a
comeback
with
consumers
and
shoppers
look
to
dress
up
after
years
of
dressing
down. 

In
the
meantime,
Nike
has
focused
on
cutting
costs
so
it
can
at
least
deliver
strong
profits
against
unsteady
sales. 

In
December,
it
announced
a

broad
restructuring
plan
to
reduce
costs
by
about
$2
billion
over
the
next
three
years.
Two
months
later,
Nike
said
it
was

shedding
2%
of
its
workforce,
or
more
than
1,500
jobs,
so
it
could
invest
in
its
growth
areas,
such
as
running,
the
women’s
category
and
the
Jordan
brand.

—
Additional
reporting
by
CNBC’s
Sara
Eisen
and
Jessica
Golden