Nike On Thursday it warned that sales will fall by a double -digit percentage in the current quarter, since the sneaker giant struggles with new tariffs, consumer confidence and a slower than expected turnaround.
In a telephone conference with analysts, CFO Matt Friend said that Nike expects the decline in sales to end in the fourth quarter of the financial year, which will end in May until the “low end” of the “middle of the teenager”. It is also assumed that the gross margin will fall between 4 and 5 percentage points, since the efforts to liquidate excess inventory and stale styles that are no longer used by consumers increase.
“We believe that the fourth quarter will reflect the greatest effects of our … actions and that the headwind will start for income and the gross margin from there,” said Freund. “We also navigate several external factors that create uncertainty in the current operating environment, including geopolitical dynamics, new tariffs, volatile exchange courses and tax regulations as well as the effects of this uncertainty and other macrofactors on the trust of consumers.”
The instructions are far worse than the analysts expected. Consales from the LSEG Show Wall Street had a decline in sales by 11.4%in the current quarter.
The stocks fell by more than 4% in extended trade and have decreased by more than 5% to date.
In addition to the instructions, Nike defeated Wall Street expectations in the third quarter.
This is how the company has developed in the quarter, compared to estimates from analysts surveyed by LSEG:
- Win each share: 54 cents vs. 29 cents estimated
- Revenue: $ 11.27 billion compared to USD $ 11.01 billion
The company's net profit for the three-month period, which ended on February 28, was $ 794 million or 54 cents per share compared to $ 1.17 billion or $ 77 cents per share in the previous year.
Sales fell to 11.27 billion US dollars and decreased by about 9% compared to $ 12.4 billion in the previous year. As with other retailers, Nike recorded a strong demand in December, followed by “two -digit” declines in January and February.
While Nike achieved a strong income, expectations were low in the publication and profits fell by 32%compared to the same period last year.
During the quarter, Nike's gross margin fell by 3.3 percentage points to 41.5%, lower than the expectations of 41.8%. This is mainly due to the costs associated with Nike's efforts to remove the old inventory in favor of new, innovative styles. In a press release, the company attributed its decline in gross margin to “Higher discounts, higher reserves for the age of the inventory, higher product costs and changes to the channel mix”.
In the meantime, sales decreased by 9%, which was due to weakness in China. In the quarter, sales in the key region fell to $ 1.73 billion by $ 17%, which, according to StreetCcount, did not fall back the expectations of 1.84 billion dollars.
“I spent some time there in December. I have not been there for some time. The competition is a bit more aggressive than I remembered,” said CEO Elliott Hill, who left Nike in 2020 and returned last year. “So we just have to speed up our pace.”
The release on Thursday comes about five months after Hill's term as CEO and his efforts to turn the business around and bring it back to growth. He has focused on regaining wholesale partners to reinforce innovations and to recover athletes who have fled to new competitors, but the work has not yet achieved any results.
“I will first say that I am proud of the progress that we made against the most important actions that we signed 90 days ago. While we met the expectations that we have determined, we are not satisfied with our overall results,” Hill told analysts. “We can and will be better.”
In the quarter, the sales of Nike's direct channels decreased by 12% to 4.7 billion US dollars. Wholesale sales fell 7% to 6.2 billion US dollars.
Since the takeover of Hill, the company has been fighting with a new dynamic that could make its comeback even more difficult.
In the three months since Nike since Nike, President Donald Trump has achieved a new tariff of 20% imported goods imported from China, the feelings of consumer have fallen and retail sales were weaker than expected in both January and February.
Of the hundreds of suppliers and manufacturers, with whom Nike works, there are about 24% in China, according to a disclosure published in January. If the retailer does not increase the prices to compensate for the tariffs and not pass the costs exclusively for suppliers, the margins of Nike have a hit from the new tasks. In the call on Thursday, Nike did not say whether it would increase prices or how exactly the new tasks would influence the margins.
If consumers do not feel safe and reduce expenses, discretionary products such as new clothes and shoes are one of the first things that they cut out in favor of the necessities. In recent years, the entire sneaker and clothing markets have been slow because consumers have reduced clothing and shoes. Until recently, the strong companies have still decided well and market share of weaker competitors.
However, this trend began to shift in the past few weeks when even the strongest companies equip the alarm through soft consumer expenses when they reported the result of the first quarter and raises questions about the health of the economy.
In the quarter, sales in North America – the largest market of Nike – fell by 4% to 4.86 billion US dollars. According to StreetCcount, however, the income in the region was better than the analysts of 4.53 billion US dollars.
It is generally expected that Nike will recapture the market share he lost and reset his business, and some insiders say that the problems of the company have been exaggerated. Nevertheless, the tariffs and economic fears could mean that the reversal of the retailer takes longer and more difficult than expected.
What is the key to Nike's turnaround plan is its ability to re-sparkle innovations and to create the kind of industry-leading shoes and clothing that have made it a market leader for a long time. During a call with analysts, Hill said early publications for the company's new Pegasus premium “almost sold out” across North America and will scale until autumn 2025. His Romero 18, created for everyday life, has achieved “outstanding” results “outstanding” results, and Nike plans to double the spread by mid -April.
“It will take some time for the volume to be reached to replace the handful of classic franchise companies we have been checked on, but our approach is easy,” said Hill. “Help consumers fall in love with something new from Nike and that something does not replace a symbol for another.”
Nike has already made progress in the efforts to increase its female consumer base, another key component to increase sales and clothing. Last month it was announced that Kim Kardashian's intimate brand Skims teamed up to create a new product line called Nikeskims, which includes clothing, shoes and accessories. The BUZZY partnership is expected to improve Nike with women and that it is better to compete with Lululemon, Alo Yoga and Vuori who are more directed for women than Nike.
In addition, Nike debut a new advertising campaign that has geared athletes during the Super Bowl, the first big game advertising for decades. The campaign showed that the achievement of athletes and the recording of the sums in the context of women's sports will be a center of Hill's strategy.
If Nike can continue to show positive signs of new product launches and partnerships, the rest of his headwind may be drowned out as noise.
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