Nike Inc. on Thursday unexpectedly forecast a revenue decline for fiscal 2025 after disappointing fourth-quarter sales revealed the company’s declining market share and the failure of its direct-to-consumer strategy.
Nike also forecast a larger-than-expected decline in first-quarter revenue, sending the company’s shares down 12 percent in after-hours trading.
The company has tried unsuccessfully to boost sales through its direct-to-consumer channel as customers tighten spending on non-essentials and splurge on fashionable, innovative brands such as On & Deckers’ Hoka.
Nike now expects full-year sales to decline in the mid-single digits, compared with forecasts of a 0.91% increase.
“The slowdown in total sales and Nike Direct sales cannot be ignored, and we continue to wonder where Nike will get its next growth foothold,” said Zachary Waring, equity analyst at CFRA Research.
Nike is also losing out to its rivals AdidasRetro-style Gazelle and Samba sneakers have helped the European sportswear manufacturer recover demand after its split from rapper Ye.
Nike has outlined plans to streamline its portfolio, but analysts say it will be a while before the sportswear company sees a recovery in demand, as innovation and the launch of new product lines take time.
The Air Jordan maker’s strategy to double down on wholesale partnerships helped drive wholesale revenue up 5% in the reported quarter, but growth in its direct-to-consumer business fell 8%.
Nike’s net revenue fell 1.71 percent to $12.61 billion, compared with analysts’ average estimate of $12.84 billion, according to LSEG data.
But the company’s $2 billion cost-cutting plan, which includes layoffs, helped adjusted earnings beat expectations of 83 cents by $1.01.
Nike has also struggled with weak demand in overseas markets, including China, where foot traffic to its physical stores has fallen by double digits from a year ago, executives said.
Chief Financial Officer Matthew Friend added that he expects headwinds including weakness in the digital business, slowing store traffic and increased promotional activity to have a “more pronounced impact” in fiscal 2025.
Nike now expects first-quarter revenue to fall about 10%, down from the previous forecast of a 3.16% decline.
