Nike Signals Guidance Cut Amid ‘Challenges’ in Q4

Shares of Nike Inc. dropped on Thursday afternoon after the company reported sales results that fell short of expectations.

For the fourth quarter, the athletic giant reported that revenues were down 2 percent to $12.6 billion over the same quarter last year, short of the $12.84 billion expected by analysts surveyed by Yahoo Finance and prior guidance. Net income was up 45 percent to $1.5 billion and diluted earnings per share were 99 cents, which included a loss of 2 cents per share of restructuring charges. This was ahead of the 83 cents expected by analysts.

According to a statement from Nike chief financial officer Matthew Friend, Nike’s fourth-quarter results “highlighted challenges” that led the company to “update” its outlook for fiscal year 2025. In a call with analysts, Nike president and chief executive officer John Donahoe said that declines in lifestyle sales as well as uncertain macroeconomic conditions caused the company to cut its guidance for fiscal year 2025.

“We are taking actions to reposition Nike to be more competitive, and to drive sustainable, profitable, long-term growth,” Friend said.

Nike shares were down more than 5 percent in the hour after markets closed on Thursday.

By brand, Nike brand revenues were down 1 percent to $12.1 billion in the fourth quarter, driven by growth in Greater China, APLA and EMEA, and offset by declines in North America. Converse brand sales declined 18 percent to $480 million. By channel, Nike direct revenues were down 8 percent to $5.1 billion, driven by digital and store declines. Wholesale was up 5 percent to $7.1 billion.

Market watchers have recently become increasingly skeptical of Nike’s performance as it continues to lose share in crucial categories like running. In December, Nike announced new measures to “streamline” its organization to save up to $2 billion in costs over the next three years by implementing layoffs, simplifying product and increasing automation. Nike also announced a new innovation pipeline after it was criticized for its lack of innovative products.

Analysts have also become increasingly skeptical of Nike’s progress within its Consumer Direct Acceleration program it rolled out in June 2020, which involves zeroing in on direct-to-consumer and digital channels and pulling out of some wholesale channels. A new lawsuit filed last week accused Nike executives of misleading investors about its purported success in its direct-to-consumer strategy.

Nike Inc. reported that both Nike direct sales and wholesale sales were up 1 percent for the year.

“We are taking our near-term challenges head-on, while making continued progress in the areas that matter most to Nike’s future — serving the athlete through performance innovation, moving at the pace of the consumer and growing the complete marketplace,” Donahoe said in a statement. “I’m confident that our teams are lining up our competitive advantages to create greater impact for our business.”

Overall, Nike Inc. revenues for fiscal year 2024 were $51.4 billion, up 1 percent from the prior year and in line with the company’s guidance. Net income for the year was up 12 percent to $5.7 billion, with diluted earnings per share of $3.73. This included 22 cents of restructuring charges.