Nike on Thursday warned that sales will shrink by a low-single-digit percentage in the first half of fiscal 2025 as the world’s largest sportswear maker scales back its franchise operations to cut costs.
Nike’s warning was issued after the stock market closed, and its stock price fell 5.6% in extended trading. Executives acknowledged that Nike’s direct-to-consumer strategy has not been driving the growth they hoped for and that the company is losing ground in the running category.
In December, Nike outlined a $2 billion savings plan that included cutting supplies of underperforming products and improving its supply chain.
On Thursday’s post-earnings call, Nike Chief Financial Officer Matthew Friend told investors that the company is shifting its focus to future running shoes, including the Air Force 1 and the current Pegasus running shoe. He said he is cutting back on orders for “Classic” shoes. Launch and development of new products.
“It’s not just about products or items, it’s about building a robust pipeline of innovation,” CEO John Donahoe said on a conference call.
Nike beat Wall Street expectations for third-quarter sales and profits on the back of holiday discounts and the launch of new sneakers, including the Ultrafly trail running shoe. The company sees it as a way to bring back customers amid increasing competition from brands such as On and Deckers. others.
Mr. Donahoe assured investors that the company will debut more new running sneakers this year, including a shoe aimed at “everyday runners” that incorporates the retailer’s Nike Air cushioning.
The company has kept its sales forecast for fiscal 2024 unchanged at 1% growth.
Emerging brands are taking market share from Nike thanks to innovative performance shoes with thick foam soles that are resonating with customers, such as On Running’s Cloudflow 4 and Hoka’s Clifton 9 and Bondi 8.
Nike reported a 3% rise in its largest market, North America, and a 5% rise in Greater China, as heavy promotions for Jordan shoes attracted customers during the all-important shopping season.
The company earned 77 cents per share for the quarter, beating expectations of 74 cents per share on the back of layoffs and cost-cutting plans.
Nike announced that its revenue rose 0.3% to $12.43 billion, beating LSEG’s forecast of $12.28 billion.
“There is nothing to indicate that there was anything out of the ordinary this quarter…What this means for the company’s turnaround…it doesn’t mean much because the company is in a restructuring situation, but it’s really just getting started. “We just did it,” said David Swartz. Morningstar analyst.
