Nike shares tumble on tepid outlook as CEO eyes Olympics marketing win

Nike promised 'bold' storytelling at the upcoming Olympics in Paris, but shares tumbled on
AFP

Nike reported higher profits due to cost-cutting efforts Thursday, but shares fell sharply on the company’s tepid outlook despite a hoped-for boost from the upcoming Olympic Games.

The sports giant, which has been criticized in recent times over a lack of innovation and strategic stumbles, reported a dip in quarterly revenues as executives cited a number of headwinds.

These included a drop in Nike’s lifestyle business, a decline in digital sales and weakness in some key markets such as China, said Chief Financial Officer Matthew Friend, adding that these factors influenced Nike’s dampened fiscal 2025 projections.

“We are managing a product cycle transition with complexity amplified by shifting channel mix dynamics,” Friend told analysts on a conference call. “A comeback at this scale takes time.”

Nike reported profits of $1.5 billion in the fiscal fourth quarter of 2024 ending May 31. That’s a surge of 45 percent from the year-ago period following price increases on some goods and lower ocean freight costs.

But revenues dropped two percent to $12.6 billion, with sales falling in both North America and the Europe, Middle East & Africa regions.

For the first half of fiscal 2025, Nike now expects a decline in sales of high single digits, Friend said. In March, Nike projected a decline in the “low single digits.”

Executives said the company expects improvement in the second half of the year. Friend said the full-year drop would be “mid single digits.”

Nike Chief Executive John Donohoe expressed confidence that the company’s product pipeline would wow consumers. He also vowed an impressive marketing blitz at the upcoming Olympic Games in Paris.

“Our brand storytelling will be bold and clear with sport and athletes at the very center of it all,” Donahoe said. “We will cut through the clutter to create powerful energy for the Nike brand.”

Neil Saunders, analyst at GlobalData, welcomed the higher profits but noted that “a brand like Nike cannot cut its way back to success.”

Great new products are essential to “stimulate buying behavior,” according to Saunders, who also said the company had gone too far in cutting back wholesale distribution, hitting market share.

“Nike is a powerful brand, and it used to own the sporting and sneaker space via a constant line up of new products with interesting narratives and powerful marketing,” he said. “Over the past year or so, the volume has been turned down and Nike is making far less noise.”

Shares of Nike plunged 11.4 percent in after-hours trading.

Authored by Afp via Breitbart June 27th 2024