Nike sees sales drop amid crisis and CEO change – 10/01/2024 – Market

Nike reported a 10% drop in quarterly sales and withdrew its annual forecast on Tuesday, sending shares tumbling as the world’s largest sportswear maker navigates a tumultuous period and awaits the arrival of its new executive director this month.

Shares fell as much as 7% in after-hours trading after the company reported earnings for the three months to the end of August. During that time, Nike’s revenue fell 10% to US$11.6 billion compared to the same quarter last year, while net profit fell 28% to US$1.1 billion. (R$ 5.9 billion).

The profits come as Nike prepares for the start of a new chief executive officer’s term. John Donahoe, who held the top role for more than four years, will be replaced by company veteran Elliott Hill.

The change in leadership follows months of weak sales as Nike’s sneakers have become obsolete in an otherwise successful sneaker industry, the result of slowing innovation and an outdated retail strategy that the company has been working to correct.

As a result of the planned transition, Nike Chief Financial Officer Matthew Friend told analysts that the company would abandon its previous guidance for fiscal 2025 — which predicted a 10% drop in revenue for the year ending in May. It will instead shift to quarterly guidance. Nike expects revenue for the current quarter to fall “in the range of 8% to 10%.”

Friend said Tuesday that orders for Nike products for spring 2025 delivery were flat compared with 2024, but that the company had seen some positives, including increased demand for high-performance running shoes.

“Throughout our history, Nike has always faced pressure,” Friend said. “We will continue to face challenges head on and look forward to Elliot’s leadership.”

Randal Konik, managing director of Jefferies, wrote on Monday that Nike shares were in “no man’s land” and that the company’s “product lineup for calendar 2025 and beyond remains uncertain.”

The company was also dealt a blow by Major League Baseball’s announcement Monday that teams would eliminate the Nike-supplied uniforms that debuted this spring. The kits, with small print and transparent fabrics, were unpopular with players and fans. Nike will continue to supply uniforms to the league, but will return to using fabrics found in previous editions starting next season.

Wall Street analysts consulted by S&P Capital IQ expected profits of US$786 million (R$4.2 billion) and US$11.7 billion (R$63.4 billion) in revenue for the three months ended in August. As of Tuesday’s close, Nike shares had fallen about 18% this year, while the S&P 500 was up more than 20%.

Analysts were closely watching Tuesday’s earnings report, which covers the important back-to-school season, particularly in North America, and generally serves as an indicator of how popular Nike products are among young consumers.

Sales in the US fell 11% to US$4.8 billion (R$26 billion), while in Greater China, sales fell 4% to US$1.6 billion (R$8.6 billion) amid higher discounts.

Nike’s board of directors held discreet 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 then-CEO.

Hill, a Texas native, joined Nike as an intern and worked his way up from sales to executive leadership before retiring in 2020. He will return to Nike on October 14.

While the company’s employees and much of Wall Street celebrated the news of Hill’s appointment — the company’s shares rose 6% the day after the announcement — analysts warned that the effects of his leadership may not be felt for months.

Nike said on Tuesday it would postpone its investor information day, initially scheduled for November, while the company goes through its executive transition. There is still no new date for the presentation.