Nike announced a 10% drop in its quarterly sales on Tuesday and retracted its full-year outlook. Shares fell as the world’s biggest sportswear manufacturer navigated a turbulent period before the arrival of their new chief executive at the end of this month.
Nike’s stock dropped as much as seven per cent after hours trading, after the company reported its earnings for the three months to the end August. Nike revenue fell 10 percent to $11.6bn, compared to the same quarter last year. Net income also dropped 28 percent to $1.1bn.
Nike is currently preparing to hire a new CEO. John Donahoe who has held the top position for over four years announced that he will retire in just two weeks. He will be replaced by veteran Elliott Hill.
This leadership change follows months of stagnant sales, as Nike trainers were outmoded within an otherwise thriving shoe industry. The result was a slowdown in innovation and a retail strategy out of step that the company has been trying to correct.
Matthew Friend, Nike’s Chief Financial Officer, told analysts that as a result the planned transition the company will abandon its previous guidance. This previously predicted a 10% decline in revenue for the fiscal year ending in may. Instead, it will switch to quarterly guidance. Nike anticipates revenue for the current quarter will fall “between 8 and 10 per cent”.
Friend stated on Tuesday that Nike orders set to be delivered in spring 2025 are flat compared to 2024. However, the company has observed some bright spots including an increase in demand for performance shoes.
Friend stated that Nike has faced pressure throughout its history. “We will continue to face the challenges and look forward Elliot’s leadership.”Randal Konik of Jefferies wrote on Monday that Nike’s shares are in a “no-man’s-land” and the “product lineup ahead for calendar [20]25, and beyond, remains unclear”.
Major League Baseball’s announced that the teams will phase out Nike uniforms, which debuted in spring. Players and fans were not fond of the kits with their small lettering and see through fabrics. Nike will continue to provide uniforms for the league, but they will use fabrics from earlier editions starting next season.
Wall Street analysts polled S&P Capital IQ predicted profits of $786mn, and revenue of $11.7bn for the three-month period ending in August. Nike shares fell 18% this year by Tuesday’s closing, while S&P 500 was up over 20%.
Analysts closely watched the earnings report Tuesday. It covers the crucial back-to school season, especially in North America and serves as a gauge of how popular Nike products are with young consumers. Nike’s domestic sales dropped 11 percent to $4.8 billion, while those in Greater China fell 4 percent to $1.6 billion amid heavy discounting.
Nike’s board held a quiet discussion this summer regarding succession planning for Donahoe just weeks after cofounder and largest shareholder Phil Knight publicly announced his full support for former eBay and Bain executive Donahoe.
Hill, who is a native of Texas, began his career with Nike as an internship after completing business school. He worked his way from sales to executive management before retiring in 2020. He will return to Nike on October 14
Analysts have warned that while Nike employees and Wall Street rejoiced at Hill’s announcement — Nike’s shares soared by 6 percent the day it was announced — they may not feel the full effects of his leadership for several months.
Nike announced on Tuesday that it will postpone its planned investor day originally scheduled for November due to the company’s executive transition. The company did not announce a new date.
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