- Nike said it is suffering from a 10% drop in sales for the current quarter.
- The reasons are weak performance in China, unstable consumption patterns globally and problems at the Converse brand, which saw its revenue fall by 18%.
- Nike tried to boost its direct sales but has now backtracked, admitting it was a mistake.
Nike shares plunged on Thursday after the sports giant cut its annual forecast and announced that it expects a 10% drop in sales for the current quarter.
The reasons, a weak performance in China, unstable consumption patterns around the world and problems in its Converse brand.
The expected 10% drop in the first quarter is larger than the 3.2% decline expected by analysts.
Now, Nike also anticipated that fiscal 2025 sales will decline more than expected.
“Coming back, it takes time,” said Matthew Friend, Nike’s CFO, in a conversation with analysts.
“Although the coming quarters will be difficult, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive long-term sustainable and profitable growth,” he added.
The complete Nike financial report.
Nike: Converse, among the reasons for the problems
Nike has adjusted its 2025 forecast for several reasons:
- a decline in online sales,
- falls of some franchises and
- greater macroeconomic uncertainty in China and “uneven” consumption patterns (as it describes them) in all its markets.
Besides, The Converse brand, owned by Nike, also performed very poorly in the overall results.
Revenue from this division fell 18% to $480 million, mainly due to declines in North America and Western Europe.
In this scenario, the obvious: Nike shares fell 11% in extended trading.
Nike changes marketing strategy
In recent months, Nike has faced difficulties in staying ahead of its smaller competitors.
Its revenue growth is slowing and criticism suggests it is falling behind in innovation as it tries to reverse its direct sales strategy, which did not produce the expected results.
Nike had been working to boost sales through its own website and stores, rather than through wholesalers like Foot Locker.
However, it has now begun to backtrack on that initiative and has admitted that it was a mistake to distance itself so much from wholesalers.
Nike’s direct revenues for the quarter totaled $5.1 billion, down 8% from the same period last year.
Nike restructuring
Meanwhile, wholesale revenue rose 5% to $7.1 billion, reflecting Nike’s shift in direct sales strategy.
Meanwhile, Nike has focused on cutting costs to at least turn a profit in the face of declining sales.
In December, it announced a restructuring plan to cut costs by about $2 billion over the next three years.
Two months later, it said it would lay off 2% of its workforce, more than 1,500 jobs, so it could invest in its growth areas, such as athletics, women’s sports and the Jordan brand.
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