(BFM Bourse) – The sports equipment manufacturer largely missed expectations in the fourth quarter and delivered disappointing prospects. The group cites its transition to new products, the reorientation of its sales channels, and the uncertainties in China.
Bank of America had warned that the market would be watching Nike’s outlook when it released its fourth-quarter results on Thursday evening. The American institution had warned that the famous sportswear manufacturer with the comma risked disappointing consensus. That is indeed what happened.
During a conference with analysts, the financial director, Matt Friend, indicated that the company expected for its 2024-2025 financial year, ending next May, a drop in its “mid single digit” sales, i.e. – say between 4% and 6%. Enough to disappoint analysts who, on average, expected a decline of 2%, according to Bloomberg data.
On Wall Street, Nike shares are taking the storm, plunging 14% in pre-opening trading this Friday, June 28.
Nike said it was specifically expecting a 10% drop in revenue in the first quarter of 2024-2025, and a “high single digit” drop, i.e. a drop of 7% to 9%, overall. of the first semester.
Change sales channels
The group cites several transitions it is currently undertaking to justify this disappointing outlook. For several quarters, Nike has been rotating items by removing old products to make room for new ones, such as withdrawing the Air Force 1 basketball shoe range.
In addition, Nike is also trying to redirect its sales towards its own stores and online sales rather than in multi-brand (wholesale) stores, such as Footlocker. However, in April, Nike CEO John Donaoe admitted to CNBC that this move had been too brutal.
“We are managing a product cycle transition, the complexity of which is amplified by the changing dynamics of the distribution channel assortment,” Matt Friend told analysts Thursday. “A comeback of this magnitude takes time,” he added.
The financial director also indicated that the company had taken into account several elements in its forecasts including “higher uncertainty, in particular in greater China (that is to say with Taiwan and Hong Kong, Editor’s note)”.
Limited impact on Adidas and Puma
Outside of the outlook, Nike also delivered a poor performance for the fourth quarter of its 2023-2024 financial year. Its revenues came in at $12.6 billion, down 2% on a comparable basis and flat excluding currency effects. According to Bank of America, the consensus was expecting revenues of $12.9 billion.
If “wholesale” revenues increased by 8% excluding currency effects, it is Nike’s direct sales to the consumer which disappoint, with a decline of 7%, including 10% on digital and 2% for its stores. The weakness in Nike’s own sales channels “is surprising and concerning, as the active apparel giant could be losing ground on its core customers due to a lack of new products,” said Poonam Goyal, an analyst at Bloomberg Intelligence .
Nike specifically cited weak sales of lifestyle footwear, which had been booming during the pandemic.
Nike’s publication has a fairly moderate impact on other sports equipment manufacturers, Puma and Adidas, which fell by 3% and 0.5% respectively in Frankfurt on Friday morning.
Stifel points out that Nike’s release came hours after Adidas confirmed its product momentum during a “pre-earnings” conference call with analysts. The bank notes the “growing divergence” between the trajectories of the two sportswear leaders. This gap is set to widen “as Nike transitions to more novelty and innovation in its product line (which Adidas did 18 months ago),” Stifel adds.
Julien Marion – ©2024 BFM Bourse
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