Ananya Mariam Rajesh and Juveria Tabassum
(Reuters) – Nike on Thursday forecast an unexpected drop in sales in fiscal 2025 as its direct-to-consumer strategy falters and the sportswear giant faces stiff competition from new brands such as On and Hoka, dragging its shares up 12% after hours.
This set Nike (NYSE:) will lose nearly $15 billion in market value if losses continue Friday. The company’s fourth-quarter revenue also missed estimates.
Nike’s efforts to increase sales through its direct sales channel have failed to produce results as shoppers become more discerning and shift to more fashionable and innovative On and Deckers’ Hoka brands.
Nike’s share of the U.S. athletic footwear market was 34.97% in 2023, up from 35.37% in 2022 and 35.40% in 2021, according to GlobalData.
Nike executives said in a post-earnings message that full-year revenue will also be impacted by weak demand in international markets, including China, where physical traffic fell by double digits from last year due to ongoing macroeconomic uncertainty.
“I think they know what the problems are, but they’re having trouble generating demand right now,” said Morningstar analyst David Schwartz.
Nike expects full-year revenue to fall by single digits, compared with estimates for 0.91% growth, and to fall about 10% in the first quarter, compared with expectations for a 3.16% decline.
Company executives confirmed that investment in introducing new product lines and attracting customers will take some time to restore the brand’s momentum.
“Nike is trying to sell the idea that it’s reinventing… But the numbers they gave… for 2025 do suggest that the company is in a bit of trouble and what they’re doing just won’t deliver next year.” year,” said GlobalData analyst Neil Saunders.
The company is banking on the Olympics, adding that the brand’s marketing campaign at the mega-sporting event is “hard to miss.”
In April, Nike said it would spend more on marketing and media at the upcoming Paris Olympics than at any previous games, as it seeks to boost sales and reclaim market space from new brands.
The company’s quarterly net revenue fell 1.71% to $12.61 billion, compared with analysts’ average estimate of $12.84 billion, LSEG said.
However, the Air Jordan maker’s strategy of doubling down on wholesale partnerships helped boost revenue in that segment to 5% in the fourth quarter, while growth in its direct-to-consumer business fell 8%.
Nike’s plan to cut $2 billion in costs, including layoffs, also helped the company hit an adjusted profit of $1.01 (the top estimate was 83 cents).
CFO Matthew Friend said the “organizational reset (and) headcount of the cost savings plan has been left behind.”