• Thu. Jul 25th, 2024

Nike posts surprise drop in sales, sending shares tanking

Nike on Thursday forecast a surprise drop in fiscal 2025 sales, after disappointing fourth-quarter sales laid bare the company’s weakening market share and its faltering direct-to-consumer strategy.

Shares of the company were down 12% in extended trading after Nike also forecast a wider-than-expected drop in first-quarter revenue.

The company’s efforts to drive more sales through its direct-to-consumer channel have failed to reap rewards as customers turn more picky about non-essential spending and splurge on fashionable and innovative brands such as On and Deckers’ Hoka.

Shares of the company were down 12% in extended trading after Nike also forecast a wider-than-expected drop in first-quarter revenue. Getty Images

Nike expects annual revenue to be down in the mid-single digits compared with estimates of a rise of 0.91%.

“The slowdown in total sales and for Nike Direct is hard to ignore. We continue to rack our brain for where Nike can get its next leg of growth,” said Zachary Warring, equity analyst at CFRA Research.

Nike is also losing ground to rival Adidas‘ retro-style Gazelle and Samba sneakers, which have helped the European sportswear maker see a rebound in demand after its damaging break-up with rapper Ye.

Even though Nike has outlined a plan to streamline its portfolio, analysts note that it would be some time before the sportswear company can revive demand as innovation and launches of new product lines take time.

The Air Jordan maker’s strategy to double down on wholesale partnerships helped wholesale revenue in the reported quarter rise 5%, while growth in its direct-to-consumer business fell 8%.

Nike has been losing market share to On and Deckers’ Hoka, above. Nattawit – stock.adobe.com

Nike’s net revenue fell 1.71% to $12.61 billion, compared with analysts’ average estimate of $12.84 billion, according to LSEG data.

However, the company’s $2 billion cost savings plan including layoffs, helped the company adjusted earnings of $1.01 top estimates of 83 cents.

Nike is also struggling with weak demand in international markets, including China, where brick and mortar traffic declined in double digits versus prior year, executives said.

Nike is also struggling with weak demand in international markets, including China Getty Images

Headwinds including weakness in its digital business, soft store traffic and higher promotions are expected to have a “more pronounced impact” in fiscal 2025, CFO Matthew Friend added.

Nike expects first-quarter revenue to fall about 10% compared with expectations of a 3.16% fall.

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