Sports apparel giant struggles to regain footing as sales slump persists
Nike’s latest quarterly report revealed a revenue shortfall and a withdrawal of its annual outlook, sending shares tumbling as much as 8% in after-hours trading. The company’s earnings per share of $0.70 beat estimates, but revenue of $11.59 billion fell short of expectations and marked a 10% decline from the same period last year.
The sales slump was evident in both Nike’s direct-to-consumer business and its wholesale division. Direct revenues dropped 13% to $4.7 billion, while Wholesale revenues fell 8% to $6.4 billion. According to Nike’s CFO Matthew Friend, the company’s turnaround efforts are taking longer than expected.
Industry analysts were not surprised by the report, citing Nike’s earlier warnings about a challenging sportswear market and lackluster innovation cycle. Morningstar equity analyst David Swartz noted that Nike is currently facing a product drought, which is exacerbating its sales woes.
The quarterly report comes on the heels of Nike’s announcement to replace CEO John Donahoe with Elliott Hill, a former executive who will take the reins on October 14. The news initially boosted Nike’s stock, but the company’s struggles persist. Nike’s shares have plummeted over 25% this year, driven by concerns over slowing sales growth and increasing competition from rivals like On and Deckers’ Hoka brand.
The sportswear industry has become increasingly competitive, and Nike’s failure to adapt quickly has hurt its performance. According to Swartz, Donahoe’s lack of understanding of the shifting landscape contributed to the company’s struggles.
Looking ahead, Nike expects revenue to decline 8%-10% in the current quarter, weaker than initial estimates. The company has also postponed its investor day, citing uncertain market conditions. Analysts believe it may take time for Hill to make a meaningful impact, with some predicting that Nike’s shares will remain range-bound for several quarters.
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