Nike adjusted its yearly sales forecast downwards, attributing it to restrained consumer spending, weaker online performance, and increased promotional activity. The company plans to curtail expenses by slashing supplies of select product lines, aiming for $2 billion in savings over three years. This strategy involves tightening product supplies, refining the supply chain, streamlining management, and incorporating more automation.
The brand’s wholesale sector faced ongoing pressure due to subdued demand, leading to reduced retailer orders. Online sales also suffered, prompting heightened promotional efforts amidst a shrinking customer base. Additionally, China experienced slowed sales due to economic challenges, prompting Nike’s CFO Matthew Friend to remark, “We are seeing indications of more cautious consumer behavior around the world.”
Revised projections anticipated a mere 1% increase in full fiscal-year revenue, significantly lower than the previously estimated mid-single-digit growth. Analysts, in contrast, had anticipated a 3.8% rise. Addressing the reduction in products, senior equity analyst David Swartz suggested, “Nike’s talking about reducing the number of products … perhaps the company feels there are too many products that are not high-margin and not really generating significant sales.”
Despite this, Nike emphasized plans to introduce fresh, appealing styles like the Sabrina 1, LeBron 21, and Tatum 1 basketball shoes to attract consumers. Friend highlighted, “In an environment like this when the consumer is under pressure and the promotional activity is higher … it’s newness and innovation which causes the consumer to act … that’s what’s going to pull us through a promotional marketplace.”
Anticipating upcoming releases in the GT Cut, Book 1, and Kobe lines, Nike aims to drive sales over the next three months. While specifics on the product franchises to be trimmed were not disclosed, the company affirmed strong performance from its iconic sneaker lines such as Air Force 1, Dunk, and Court.
Nike’s fiscal second-quarter revenue tallied $13.39 billion, slightly below the estimated $13.43 billion. However, per-share earnings of $1.03 surpassed predictions of 85 cents, attributed to reduced freight costs and inventory adjustments.
As part of the restructuring, Nike foresees pre-tax charges between $400 million to $450 million in the third quarter, primarily connected to employee severance expenses.
Despite these challenges, Nike’s shares have experienced a modest increase of less than 5% this year, contrasting sharply with the S&P 500’s 24% surge and Adidas’s robust 52.5% gain.
