Nike (NKE) earnings Q1 2025

Nike on Tuesday stated it was withdrawing its full-year steerage and suspending its investor day because it gears up for a brand new CEO to take the helm.

Final month, the corporate introduced that CEO John Donahoe could be stepping down in October and changed with longtime firm veteran Elliott Hill, efficient Oct. 14. Given the upcoming CEO change, the corporate has determined to withdraw its full-year steerage and intends to offer quarterly steerage for the stability of the yr, executives stated.

“This gives Elliot with the pliability to reconnect with our workers and groups, consider the present methods and enterprise traits and develop our plans to greatest place the enterprise for fiscal ’26 and past,” finance chief Matthew Buddy stated on an earnings name with analysts.

When reporting fiscal fourth-quarter ends in June, Nike lower its steerage for fiscal 2025 and stated it was anticipating gross sales to be down mid-single digits after it beforehand anticipated them to develop. Buddy stated for the reason that fiscal yr began, the corporate’s “income expectations have moderated… given site visitors traits on Nike Digital, retail gross sales traits throughout {the marketplace} and remaining order books for spring.”

“We proceed to see indications of slight second-half enchancment in income traits versus our first half,” stated Buddy. “As we plan to introduce and scale newness and innovation throughout {the marketplace}, we now anticipate gross margins to say no versus the prior yr.”

The corporate’s investor day, initially scheduled for November, might be postponed, Nike stated in a information launch Tuesday. It is unclear when the assembly might be rescheduled. 

Shares fell about 5% in prolonged buying and selling after the updates and after Nike delivered combined outcomes for its fiscal first quarter.

This is how the world’s largest sneaker retailer carried out in contrast with what Wall Road was anticipating, based mostly on a survey of analysts by LSEG:

• Earnings per share: 70 cents vs 52 cents
• Income: $11.59 billion vs $11.65 billion

The corporate’s reported internet revenue for the three-month interval that ended August 31 was $1.05 billion, or 70 cents per share, in contrast with $1.45 billion, or 94 cents per share, a yr earlier.

Nike beat earnings expectations by 18 cents, however it fell brief on income as it really works to repair its product assortment and rework its strategy to innovation.

Gross sales dropped to $11.59 billion, down about 10% from $12.94 billion a yr earlier.

Nike’s gross margin grew by 1.2 share factors within the quarter to 45.4%, increased than the 44.4% that StreetAccount analysts had anticipated. Nonetheless, earnings fell by practically 28% throughout the quarter.

Over the past yr, Nike has been accused of falling behind on innovation and ceding share to opponents because it targeted on promoting on to customers by way of its personal web sites and shops slightly than by way of wholesalers similar to Foot Locker and DSW. 

At first, the technique was a boon to Nike’s earnings and gross sales throughout the Covid pandemic, however because it scaled, it acquired extra complicated and customers began returning to shops and different in-person actions.

Throughout the quarter, Nike Direct gross sales had been down 13% to $4.7 billion, whereas Nike digital gross sales had been down 15%.

Critics say Nike’s deal with direct promoting additionally led it to take its eye off innovation.

Below Donahoe’s management, the corporate grew annual gross sales by greater than 31%, however it acquired there by churning out legacy franchises similar to Air Power 1s, Dunks and Air Jordan 1s — not the groundbreaking types that turned the corporate into a worldwide powerhouse. 

Gross sales for these legacy franchises are now not boosting gross sales in the identical approach they’d beforehand, and in consequence, the corporate has labored to chop off provide to drive up demand and recapture their cool issue.

Throughout the first quarter, gross sales for these franchises declined greater than the general enterprise. On-line gross sales for Air Power 1s, Dunks and Air Jordan 1s mixed had been down practically 50%. Jordan model alone was down double-digits throughout the quarter, and the corporate expects it to be down on the similar charge for fiscal 2025.

The corporate additionally expects general on-line gross sales to be down double-digits in fiscal 2025.

Final yr, Donahoe began to acknowledge Nike wanted to mend its relationships with wholesalers, however the firm’s board determined that Hill, who spent 32 years with Nike earlier than retiring in 2020, could be the fitting individual to steer its subsequent chapter. 

Hill is understood to be well-regarded amongst Nike’s retail companions, when he takes over later this month, he’ll have work to do to rebuild these relationships.

Wholesalers have beforehand spoken out about Nike’s product lineup and the way the identical outdated recycled franchises weren’t doing sufficient to drive gross sales. They’ve additionally been working to maintain their very own inventories in line and have been cautious about ordering an excessive amount of product.

Nike’s fiscal first-quarter wholesale income was down 8% to $6.4 billion.

“The multi-brand surroundings could be very aggressive at the moment, and it’ll take time to increase market share. This was mirrored in our spring ’25 order books, which got here in roughly flat versus the prior yr,” Buddy stated on the earnings name, including orders had been a “little lighter” than anticipated.

Compounding the problem is the general sneaker market, which has been comparatively stagnant within the U.S., and a slowdown in client spending on discretionary items similar to new garments and footwear.

Footwear gross sales within the U.S. are projected to develop by simply 2% in 2024 in contrast with 2023 after barely budging between 2022 and 2023, in accordance with Euromonitor. Athletic footwear is predicted to develop by about 5.6%, the agency stated. 

Throughout the newest quarter, Nike footwear gross sales in North America had been down 14%, and attire gross sales fell 10%.

Converse, which Nike acquired in 2003, can also be weighing down the corporate’s general efficiency. Gross sales fell 15% to $501 million throughout the quarter however carried out higher than the $493 million that analysts had anticipated, in accordance with StreetAccount.

China’s central financial institution not too long ago unveiled its largest stimulus measures for the reason that Covid pandemic, which is predicted to offer the area’s financial system a much-needed increase. 

Nike’s fiscal first quarter concluded previous to these stimulus measures, however executives might share colour on how gross sales are performing throughout the present interval. 

Shares of Nike closed at $89.13 on Tuesday, down about 18% up to now in 2024, considerably underperforming the S&P 500’s beneficial properties of about 20%.