Business

Nike shares set to tumble as sales warning rattles sports retailers

Sportswear maker says it is taking aggressive action to reorganise inventory after weaker than expected quarter

Nike on Thursday reported weaker than expected quarterly sales. Photograph: Krisztian Bocsi/Bloomberg

Sara Germano
Jaren Kerr
Fri Jun 28 2024 - 10:00

Nike shares are set to tumble on Friday after the world’s largest sportswear maker by revenue warned sales would fall this year, rattling retail stocks from JD Sports to Foot Locker.

Nike on Thursday reported weaker than expected quarterly sales and lowered its outlook for the year ahead, projecting that revenue would fall by a mid-single-digit percentage amid a slowdown in demand.

Others retail stocks were pulled down following the update including London-listed JD Sports, which fell 4 per cent in morning trading on Friday, and US sportswear groups including Foot Locker and Under Armour, which dropped in after-hours trading in New York.

Matthew Friend, Nike’s chief financial officer, said the fourth-quarter results had “highlighted challenges” that had led it to update its full-year outlook. The company was taking “aggressive” action to reorganise inventory at Nike-owned stores and in its digital channel, he said, after seeing slowing demand for lifestyle products.

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Revenues for Nike’s direct-to-consumer segment fell 8 per cent in the three months ended in May to $5.1 billion (€4.8 billion), while overall revenues sank 2 per cent to $12.6 billion.

The news of declining demand in Nike’s stores and online sent its shares down more than 12 per cent in after-hours trading in New York on Thursday evening to $82.50, having closed at $94 for the day.

Nike has spent much of the year executing a strategy shift and a $2 billion cost-saving plan articulated in December, when it also suffered a steep stock drop after warning of softening consumer demand.

The shift is something of an about-face on a previous reorganisation, begun before the Covid-19 pandemic, to focus on direct-to-consumer and digital sales.

John Donahoe, Nike’s chief executive, told analysts on a conference call that “the headcount dimension of the save-to-invest [plan] is behind us. And now those teams are focused on driving for the consumer innovation and execution”.

At the same time, Nike has faced increased competition from smaller rivals, including brands such as Hoka and On, which have taken market share, especially in the wholesale running category as Nike focused on direct-to-consumer sales.

Mr Friend, Nike’s CFO, said it was now aiming to win back market share and expand “the overall marketplace” rather than focusing on “one particular channel or the other”.

In its latest quarter, Nike also reported declines in the greater China region, where its brick-and-mortar traffic fell by “double digits” compared with the previous year, and “uneven” trends in Europe, the Middle East and Africa.

The company said it expected revenue to drop by 10 per cent in the current quarter, and for revenue in the 2025 fiscal year – which started in June – to decline by a mid-single-digit percentage.

Nike’s revenues were slightly below expectations last quarter as sales of its Converse brand dropped 18 per cent, but the company’s earnings of 99 cents a share exceeded analysts’ forecasts by almost 20 per cent. Year-on-year, sales fell 1.7 per cent, while net income was up 45 per cent. – Copyright The Financial Times

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