Agencies
Shares of Nike plunged Friday 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 said Thursday it 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.
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.
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.”
