Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Nike reported a 10 per cent drop in quarterly sales and withdrew its full-year forecast on Tuesday, sending shares lower as the world’s largest sportswear maker navigates a tumultuous period ahead of the arrival of its new chief executive later this month.
The company’s stock fell as much as 7 per cent in after-hours trading after Nike reported earnings for the three-month period to the end of August. During that time Nike revenue declined 10 per cent to $11.6bn compared with the same quarter a year ago, while net income dropped 28 per cent to $1.1bn.
The earnings come as Nike is preparing for a new chief executive. John Donahoe, who held the top job for more than four years, said he would retire in two weeks and be replaced by company veteran Elliott Hill.
The leadership shuffle follows months of sluggish sales as Nike trainers became outmoded in an otherwise thriving sneaker industry, the result of slowing innovation and an out-of-step retail strategy that it has been working to correct.
As a result of the planned transition, Nike’s chief financial officer Matthew Friend told analysts that the company would abandon its previous guidance for fiscal 2025 — which previously forecast a 10 per cent decline in revenues for the year ending in May. It will instead shift to quarterly guidance. Nike expects revenues for its current quarter to fall “in the 8 to 10 per cent range”.
Friend said on Tuesday that orders for Nike products set for delivery in spring 2025 were flat, compared with 2024, but that the company had observed some bright spots, including increased demand for performance running footwear.
“Throughout our history, Nike has always faced pressure,” Friend said. “We will continue to address the challenges head-on, and look forward to Elliot’s leadership.”
Randal Konik, managing director at Jefferies, on Monday wrote Nike shares were in “no man’s land” and that the company’s “product line-up ahead for calendar [20]25 and beyond remains unclear”.
It was also dealt a blow by Major League Baseball’s announcement on Monday that teams would phase out the Nike-supplied uniforms that debuted this spring. The kits, featuring small lettering and see-through fabrics, were unpopular with players and fans. Nike will continue to supply uniforms to the league but will revert to using fabrics found in earlier editions from next season.
Wall Street analysts polled by S&P Capital IQ expected profits of $786mn and $11.7bn in revenue for the three months ended in August. By Tuesday’s close, Nike’s shares had fallen roughly 18 per cent this year, while the S&P 500 is up more than 20 per cent.
Analysts were closely watching the earnings report on Tuesday, which covers the critical back-to-school season, particularly in North America, and typically serves as an indicator of how popular Nike’s products are among young consumers. Sales in Nike’s home region fell 11 per cent to $4.8bn, while in greater China, sales fell 4 per cent to $1.6bn amid heavier discounting.
Nike’s board of directors held quiet discussions this summer about succession planning for Donahoe, just weeks after co-founder and largest individual shareholder Phil Knight publicly declared his full support for the former eBay and Bain executive.
Hill, a Texas native, joined Nike as an intern after business school and worked his way up from sales to executive leadership before retiring in 2020. He will rejoin Nike on October 14.
While Nike employees and much of Wall Street celebrated news of Hill’s appointment — the company’s shares surged 6 per cent the day after it was announced — analysts have cautioned that the effects of his leadership may not be felt for months.
Nike on Tuesday said it would postpone a planned investor day, initially scheduled for November, as the company undergoes its executive transition. It did not give a new date for the presentation.
Read the full article here
