Nike expects a decline in first-half fiscal 2025 revenue due to a strategy shift away from certain product lines, impacting shares. (Reuters)
Nike issued a cautionary statement on Thursday, revealing an anticipated decrease in revenue for the first half of fiscal 2025, citing a low single-digit percentage decline. The announcement coincided with the end of the trading day, causing a 5.6% drop in shares during after-hours trading.
Key executives admitted that the company's direct-to-consumer approach hadn't yielded the anticipated growth and that it was losing traction in the running segment.
This warning follows Nike's earlier plan unveiled in December to save $2 billion, involving trimming down the supply of underperforming items and enhancing its supply chain efficiency.
During a post-results discussion, Nike's CFO, Matthew Friend, informed investors of the company's decision to scale back orders for traditional sneakers like the Air Force 1 and current Pegasus Running shoes. This shift aims to prioritize forthcoming releases and the development of new products, as emphasized by CEO John Donahoe during the call.
Despite these adjustments, Nike surpassed third-quarter revenue and profit expectations, driven by seasonal discounts and the introduction of new sneaker models, notably the Ultrafly trail running shoe. Donahoe assured investors of more running shoe launches, including models tailored for everyday runners incorporating Nike Air cushioning.
While maintaining its fiscal 2024 revenue projection of a 1% increase, Nike faces intensified competition from emerging brands like On Running and Hoka, whose innovative performance shoes such as Cloudflow 4 and Clifton 9 and Bondi 8 have resonated with consumers.
In terms of regional performance, Nike witnessed a 3% uptick in North America, its primary market, and a 5% increase in Greater China, propelled by substantial promotions on its Jordan footwear lineup during the crucial holiday shopping period. The company's quarterly earnings of 77 cents per share exceeded analyst estimates of 74 cents, driven by workforce reductions and cost-saving measures.
Nike's revenue climbed by 0.3% to $12.43 billion, surpassing predictions of $12.28 billion by the LSEG. Despite these positive indicators, David Swartz, an analyst at Morningstar, cautioned against reading too much into the quarter's performance, suggesting that the company's restructuring efforts are still in early stages.
