Nike (NKE) earnings Q1 2025

Nike announced Tuesday that the company is withdrawing its full-year guidance and postponing its investor day as it prepares for a new CEO to take the helm.

Last month, the company announced that CEO John Donahoe would step down in October and be replaced by long-time company veteran Elliott Hill, effective October 14. Given the impending CEO change, the company has decided to withdraw its full-year guidance and intends to provide quarterly guidance for the remainder of the year, executives said.

“This gives Elliot the flexibility to re-engage with our people and teams, assess current strategies and business trends, and develop our plans to optimally position the company for fiscal 2026 and beyond,” said Chief Financial Officer Matthew Friend on an earnings conference call with analysts.

When Nike reported fiscal fourth-quarter results in June, it lowered its forecast for fiscal 2025 and said it expected a mid-single-digit decline in sales after previously expecting growth. Friend said that since the start of the fiscal year, the company's “sales expectations have weakened… given Nike Digital traffic trends, retail sales across the market and final order books for the spring.”

“We continue to see signs of modest improvement in sales trends in the second half compared to the first half,” Friend said. “As we plan to introduce and scale novelties and innovations across the market, we now expect gross margins to decline compared to last year.”

Nike expects a revenue decline of between 8% and 10% and a gross margin decline of about 1.5 percentage points for the current quarter. That's worse than the 6.9% sales decline expected by LSEG analysts.

In addition, the investor day originally planned for November will be postponed. It is unclear when the meeting will be rescheduled.

Shares fell in extended trading following the updates and after Nike delivered mixed fiscal first-quarter results.

Here's how the world's largest sneaker retailer performed compared to Wall Street's expectations, based on an LSEG analyst survey:

• Earnings per share: 70 cents versus 52 cents
• Revenue: $11.59 billion versus $11.65 billion

The company's reported net income for the three-month period ended Aug. 31 was $1.05 billion, or 70 cents per share, compared with $1.45 billion, or 94 cents per share, a year earlier.

Nike beat earnings expectations by 18 cents but fell short on sales as the company works to correct its product lineup and overhaul its approach to innovation.

Revenue fell to $11.59 billion, down about 10% from $12.94 billion a year ago.

Nike's gross margin rose 1.2 percentage points to 45.4% in the quarter, above the 44.4% expected by StreetAccount analysts. Still, profits fell nearly 28% during the quarter.

Over the past year, Nike has been accused of falling behind in innovation and giving up market share to rivals as it focuses on selling directly to consumers through its own websites and stores rather than through wholesalers such as. B. concentrated Foot Locker And DSW.

Initially the strategy was a boon to Nike's profits and sales during the Covid pandemic, but as it expanded and consumers returned to stores and other in-person activities.

During the quarter, Nike's direct sales fell 13% to $4.7 billion, while Nike's digital sales fell 15%.

Critics say Nike's focus on direct sales has also caused the company to lose sight of innovation.

Under Donahoe's leadership, the company grew annual sales by more than 31%, but achieved that goal by introducing legacy franchises like Air Force 1s, Dunks and Air Jordan 1s — not the groundbreaking styles that made the company a global powerhouse made.

Sales from these legacy franchises no longer drive revenue the same way they did before. That's why the company has been working to curb supply to boost demand and regain their cool factor.

In the first quarter, sales of these franchises fell more sharply than the overall business. Online sales for Air Force 1s, Dunks and Air Jordan 1s combined fell nearly 50%. Jordan Brand alone saw a double-digit decline in the quarter, and the company expects a decline of the same amount in fiscal 2025.

The company also expects total online sales to decline by double digits in fiscal 2025.

Last year, Donahoe began to recognize that Nike needed to improve its relationships with wholesalers, but the company's board decided that Hill, who spent 32 years at Nike before retiring in 2020, would be the right person to do it to guide the next chapter.

Hill is known to be highly regarded by Nike's retail partners. When he takes over later this month, he will have a lot of work to do to rebuild those relationships.

Wholesalers have previously spoken out about Nike's product lineup and how the same old recycling franchises haven't done enough to drive sales. They have also worked to keep their own inventory under control and have been cautious about ordering too much product.

Nike's wholesale sales fell 8% to $6.4 billion in its fiscal first quarter.

“The multi-brand environment today is very competitive and it will take time to expand market share. This was reflected in our spring 2025 order books, which remained approximately flat year over year,” Friend said on the earnings call. Adding orders was “a little easier” than expected.

Making matters worse, the overall sneaker market in the US is relatively stagnant and consumer spending on consumer goods such as new clothing and shoes is slowing.

U.S. shoe sales are expected to grow just 2% in 2024 compared to 2023, after little change between 2022 and 2023, according to Euromonitor. The company said the athletic footwear market is expected to grow about 5.6%.

Last quarter, Nike shoe sales in North America fell 14% and apparel sales fell 10%.

Converse, which Nike acquired in 2003, is also weighing on the company's overall performance. According to StreetAccount, revenue fell 15% to $501 million during the quarter, but beat analysts' expectations of $493 million.

Nike's performance was also hurt by the uneven economy in China, Nike's third-largest market by sales. Nike's performance in China is often an indicator of the region's financial health, and in late June the company warned of a “weaker outlook” in the region.

According to StreetAccount, Nike reported revenue of $1.67 billion in the region in its fiscal first quarter, slightly higher than the $1.62 billion expected by analysts. Still, traffic in the region is “weak” and Friend said Nike is “not immune” to China's challenging consumer environment.

China's central bank recently unveiled its biggest stimulus measures since the Covid pandemic, which is expected to provide a much-needed boost to the region's economy.

Nike's first fiscal quarter ended before these stimulus measures, but executives could comment on sales performance in the current period.

Shares of Nike closed at $89.13 on Tuesday, down about 18% so far in 2024 and well below the S&P 500's gains of about 20%.