Nike, the global leader in sportswear, announced a potential decline in revenue for the first half of fiscal 2025, projecting a decrease by a low single-digit percentage.
This forecast was shared after the stock market closure, leading to a 6% drop in Nike’s shares during extended trading hours.
The company’s shift in strategy, particularly reducing its reliance on franchises to cut costs, was highlighted as a contributing factor to this outlook.
Despite efforts to enhance direct-to-consumer sales, Nike admitted to facing challenges in stimulating growth through this avenue and acknowledged a slip in its dominance within the running gear segment.
In December, Nike unveiled a $2 billion cost-saving initiative aimed at trimming underperforming product lines and enhancing its supply chain efficiency.
During a conference call, CFO Matthew Friend and CEO John Donahoe emphasized the company’s current strategic adjustments, including reducing orders for classic and current sneaker models like Air Force 1 and Pegasus Running shoes.
The focus, according to Donahoe, is on fostering a strong pipeline of innovative products rather than on individual items.
Despite these strategic challenges, Nike reported exceeding Wall Street’s third-quarter expectations, buoyed by holiday discounts and new product releases, such as the Ultrafly trail running shoe.
These efforts are seen as critical to regaining customer interest and standing up to the competitive pressure from emerging brands like On and Decker’s Hoka, which have been gaining market share with their innovative footwear designs.
The company also reaffirmed its revenue growth forecast for fiscal 2024 at 1%.
The introduction of shoes with thick foam soles by competitors like On Running and Hoka has notably resonated with consumers, eroding Nike’s market share.
However, Nike experienced a sales uplift in North America and Greater China, its primary markets, partly due to aggressive promotions of its Jordan brand during key shopping periods.
With a quarterly profit surpassing expectations, Nike’s focus on job cuts and its broader cost-saving strategy seem to be paying dividends.
However, analysts like David Swartz from Morningstar suggest that while the quarterly results don’t signal a significant deviation from the norm, they also don’t mark a decisive turnaround for the company, which is still in the early stages of a broader restructuring effort.