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Home » Nike (NKE) Q4 2024 Earnings
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Nike (NKE) Q4 2024 Earnings

i2wtcBy i2wtcJune 27, 2024No Comments6 Mins Read
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Nike shoes and logos are seen at a store in Nice, France, on May 28, 2024.

Jakub Polzycki | Nurphoto | Getty Images

Sneaker giant Nike now expects its fiscal 2025 sales to decline by a mid-single digit percentage, compared with analysts’ expectations of a 0.9% increase. Nike had previously expected sales to increase. The company also now expects first-half sales to decline by a high-single digit percentage, up from its previous forecast of a low-single digit decline.

“A comeback of this magnitude takes time,” the retailer’s chief financial officer, Matthew Friend, said on a conference call with analysts. “The coming quarters will be challenging, but we are confident we are repositioning Nike to better compete with a more balanced portfolio and drive sustainable, profitable long-term growth.”

Friend said the company lowered its outlook to address slowing online sales, the planned winding down of its staple footwear franchises, “heightened macroeconomic uncertainty” in greater China and “uneven consumer trends” across Nike’s markets. The company also expects sales to wholesalers to slow as it scales up new innovations and winds down staple franchises.

Shares plunged about 11% in after-hours trading.

In the fourth quarter, cost-cutting efforts continued to bear fruit, helping the company beat profit expectations by a large margin, but sales fell short.

Based on an analyst survey by LSEG, here’s how Nike’s performance over the period compares to Wall Street expectations:

  • Earnings per share: Adjusted earnings: $1.01 (expected: 83 cents)
  • Revenue: $12.61 billion vs. expected $12.84 billion

The company reported net income for the three months ended May 31 of $1.5 billion, or 99 cents a share, down from $1.03 billion, or 66 cents a share, a year earlier.

Sales fell about 2% to $12.61 billion from $12.83 billion in the same period last year.

Nike projects fiscal 2024 revenue of $51.36 billion, flat from the previous year. This would be the company’s slowest annual sales growth rate since 2010, excluding the coronavirus pandemic.

Nike executives blamed a variety of factors for the sales shortfall, including a decline in its lifestyle business in the quarter and insufficient momentum in its performance businesses, such as basketball and running shoes, to make up for it.

Nike’s online performance was weaker due to its high share of lifestyle products, increased promotions and declining sales of staple franchises such as the Air Force 1. It also saw its traffic in China decline across all channels since April due to macroeconomic conditions in the region.

Despite weaker traffic in China, sales in the region beat Wall Street expectations, reaching $1.86 billion compared with expectations of $1.79 billion, according to Street accounts. It was the only geographic segment to beat expectations in the period.

Sales in North America, the largest market, came in at $5.28 billion, below the $5.45 billion expected by Street accounts.

In Europe, the Middle East and Africa, Nike posted sales of $3.29 billion compared to expectations of $3.32 billion, and in Asia Pacific and Latin America, sales were $1.71 billion compared to expectations of $1.77 billion.

Still, Friend later warned of a “weak outlook” in China, saying sales there would have fallen short of Nike’s internal forecasts without Chinese marketplace Tmall’s early entry into the region’s 618 shopping holiday.

“The China market remains a highly promotional market and we continue to carefully manage inventory for Nike and our partners,” Friend said. “While the short-term outlook has softened, we remain confident in Nike’s competitive position in China in the long term.”

Nike’s Converse brand was another big underperformer in overall performance, with division revenue falling 18% to $480 million, mainly due to declines in North America and Western Europe.

The longtime leader in sneakers and sportswear has struggled in recent months to stay ahead of a slew of newer companies, with revenue growth slowing, criticism it has lagged behind on innovation and the company in the process of backing away from a direct-to-consumer strategy that hasn’t produced the results it hoped for.

Under a strategic shift, Nike has been trying to drive sales through its own website and stores rather than through wholesalers like Foot Locker, but it recently began backtracking on that effort, telling CNBC in April that it had gone too far by moving away from wholesalers.

While this strategy can increase profitability and give companies better control over their brands and customer data, it can also create logistical challenges and come with unexpected — and costly — issues.

Nike’s direct revenue for the quarter was $5.1 billion, down 8% from the same period a year ago, while wholesale revenue rose 5% to $7.1 billion, reflecting Nike’s shift toward direct sales.

Some analysts say Nike’s focus on building a direct-sales strategy has distracted the company from the main attribute that has long set it apart: innovation.

While retailers continue to churn out old favorites like the Air Force 1, upstart brands like On Running and Hoka are surprising runners with fresh designs and stealing their customers.

Nike has said it will reduce the amount of product it has on the market in favor of new innovations, and hopes that a series of new styles and the 2024 Paris Olympics will put the company back on firm footing.

During the company’s conference call, Chief Executive Officer John Donahoe said Nike is accelerating plans to reduce supply in its classic franchises as the brand’s online performance weakens and is expected to impact fiscal 2025 revenue.

“As we address short-term challenges head-on, we are making continued progress in the areas that matter most to Nike’s future: serving athletes through performance innovation, moving at the pace of consumers and growing the overall market,” Donahoe said in a statement. “I am confident our teams are delivering competitive advantage and driving even greater impact for our business.”

Some of Nike’s challenges are beyond its control. The company is battling a tough macroeconomic environment that has consumers pulling back on sneaker purchases. It may also be caught in trend headwinds. Some analysts expect sports goods in general to slow this year as denim makes a consumer comeback and shoppers look to dress up from years of casual attire.

Nike, meanwhile, has been focusing on cutting costs so that it can at least make high profits despite volatile sales.

The company announced a major restructuring plan in December aimed at cutting about $2 billion in costs over the next three years. Two months later, Nike said it would cut 2% of its workforce, or more than 1,500 jobs, to invest in growth areas like running, women’s products and the Jordan Brand.

—Additional reporting by CNBC’s Sarah Eisen and Jessica Golden

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