US Markets
Tuesday, October 1st, 2024 5:44 pm EDT
Key Points
- Expected Weak Financial Performance: Analysts predict Nike’s fiscal first-quarter earnings for 2025 to reflect a 10% drop in sales and a nearly 45% decline in profits, with projected earnings per share of 52 cents and revenue of $11.65 billion.
- Leadership Transition: CEO John Donahoe is stepping down, and veteran Nike executive Elliott Hill will take over on October 14. Hill will be tasked with reviving innovation, mending relationships with wholesalers, and addressing cultural and morale issues within the company.
- Market Challenges: Nike faces difficulties due to stagnant U.S. consumer spending on discretionary goods and a softer economic outlook in China, its third-largest market, which has weighed down the company’s performance in recent quarters.
Nike is set to report its fiscal first-quarter earnings for 2025 on Tuesday, with analysts expecting underwhelming results. The forecast includes earnings per share of 52 cents and revenue of $11.65 billion, reflecting a projected 10% drop in sales and a near 45% decline in profits compared to the previous year. These figures come as Nike faces challenges related to innovation, market competition, and strategic decisions, including a shift towards direct-to-consumer sales at the expense of its relationships with wholesalers like Foot Locker and DSW.
A significant change in leadership is underway at Nike, as CEO John Donahoe prepares to step down and will be succeeded by company veteran Elliott Hill on October 14. During Donahoe’s tenure, Nike saw over 31% growth in annual sales, but much of this success was driven by legacy products such as Air Force 1s, Dunks, and Air Jordan 1s, rather than new, innovative offerings. This has led to criticism that Nike has fallen behind in innovation and ceded market share to competitors.
Under Hill’s leadership, the company is expected to focus on revitalizing its innovation pipeline, rebuilding relationships with wholesalers, and addressing internal challenges, including low morale following layoffs and cultural disruptions. Investors will be closely watching for any indications of Nike’s strategic direction during its conference call, where Donahoe is expected to participate.
The sneaker market in the U.S. has been stagnant, with consumer spending on discretionary goods like shoes remaining sluggish. While total footwear sales in the U.S. are projected to grow by only 2% in 2024, athletic footwear is expected to see a 5.6% increase. This slow growth adds to Nike’s challenges, particularly as it navigates an uneven economy in China, which is its third-largest market. In June, Nike warned of a softer outlook in China, but recent stimulus measures from China’s central bank may help improve the region’s economy, which could benefit Nike in future quarters.
Nike’s first-quarter results will reflect the period before these stimulus measures took effect, but investors will be interested in any updates on current sales trends. Nike’s stock has struggled in 2024, closing at $88.40 on Monday, marking a 19% decline for the year, underperforming the S&P 500, which is up about 21% during the same period. The upcoming earnings report will be critical in determining whether Nike can begin to reverse its recent struggles and regain investor confidence.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/10/01/nike-nke-earnings-q1-2025.html
