Nike warned on Thursday that its revenue in the primary half of fiscal 2025 would shrink by a low single-digit percentage because the world’s largest sportswear maker scales back on franchises to save lots of costs.
Nike’s warning got here after the stock market closed, and shares were down 5.6% in prolonged trading. Executives acknowledged that Nike’s direct-to-consumer strategy was not driving growth as expected and that it was losing ground within the running category.
In December, Nike outlined a $2 billion savings plan, which included reducing the provision of underperforming products and improving its supply chain.
Nike outlined a $2 billion savings plan in December. REUTERS
In a post-results call on Thursday, Nike CFO Matthew Friend told investors that the corporate was cutting back on orders of “classic” shoes comparable to the Air Force 1, in addition to current Pegasus Trainers, because it shifted its focus to imminent launches and developing recent products.
“It’s not only a couple of product or an item here and there — it’s about constructing a sturdy pipeline of innovation,” CEO John Donahoe said on the decision.
Nike beat Wall Street estimates for third-quarter revenue and profit on the back of holiday season discounts and recent sneaker launches, including the Ultrafly trail running shoe, which it views as a way recoil customers amid rising competition from brands comparable to On and Decker’s Hoka.
Donahoe promised investors that the corporate can be debuting additional recent running sneakers this 12 months, including shoes for “on a regular basis runners” that incorporate the retailer’s Nike Air cushioning.
The corporate maintained its fiscal 2024 revenue forecast of a 1% growth.
“It’s not only a couple of product or an item here and there — it’s about constructing a sturdy pipeline of innovation,” CEO John Donahoe said. Getty Images
Newer brands have been taking away market share from Nike thanks to progressive performance shoes comparable to On Running’s Cloudflow 4 and Hoka’s Clifton 9 and Bondi 8, which have thick foam soles which can be resonating with customers.
Nike reported a 3% jump in North America, its largest market, and a 5% rise in Greater China, as heavy promotions on its Jordan shoes attracted customers throughout the all-important shopping season.
The corporate’s quarterly profit of 77 cents per share topped estimates of 74 cents on the back of job cuts and its cost savings plan.
The corporate maintained its fiscal 2024 revenue forecast of a 1% growth. Getty Images
Nike said revenue rose 0.3% to $12.43 billion, beating LSEG estimates of $12.28 billion.
“There’s nothing here that shows there may be anything unusual within the quarter…so far as what this implies for the corporate’s turnaround…it doesn’t mean much because the corporate is in a restructuring situation however it’s really only began,” said David Swartz, analyst at Morningstar.
