Nike Drops On Weak Q1 Revenue View, FY25 Outlook Revision

(RTTNews) - Shares of Nike Inc. were down more than 12 percent in the extended trading on Thursday on the NYSE after the sportswear giant warned on weak revenues in its first quarter, and trimmed its fiscal 2025 revenue view amid lower fourth-quarter revenues, below the Wall Street estimates. The quarterly results reflected poor performance by NIKE Brand, mainly Digital, as well as Converse, its athletic lifestyle footwear, apparel and accessories unit, despite growth in wholesale revenues. The Beaverton, Oregon-based company's earnings, however, climbed from last year and beat the Street estimates.

According to the firm, strong gains within performance product was more than offset by declines in lifestyle, which had a pronounced impact on its digital results. These factors, when combined with increased macro uncertainty and worsening foreign exchange have caused it to reduce guidance for fiscal 2025.

Matthew Friend, Chief Financial Officer, said, "... we have been navigating several headwinds, which we now expect to have a more pronounced impact on fiscal '25. Although the next few quarters will be challenging, we are confident that we are repositioning NIKE to be more competitive with a more balanced portfolio to drive sustainable, profitable long-term growth."

In its fourth-quarter earnings call, Nike said the outlook revision reflects "timelines and pacing to manage marketplace supply of our classic footwear franchises; lower NIKE Digital growth, especially in the first half of the year due to lower traffic on fewer launches, planned declines of classic footwear franchises given Q4 trends, as well as reduced promotional activity."

In addition, increased macro uncertainty, particularly in Greater China, with uneven consumer trends continuing in EMEA and other markets around the world, among others, would also impact the results.

For the first quarter, the company projects revenue to be down approximately 10 percent.

Further, for fiscal 2025, the company now expects reported revenue to be down mid-single digits with the first half down high single digits.

While announcing the third-quarter results in March, the company had shared some early thoughts on next fiscal year, expecting revenue and earnings to grow versus the prior year, while revenue in the first half was expected to be down low single digits.

In its fourth quarter, Nike's bottom line came in at $1.50 billion, 45 percent higher than $1.03 billion last year. Earnings per share were $0.99, a growth of 50 percent from prior year's $0.66.

Adjusted earnings were $1.01 per share for the period. Analysts on average had expected the company to earn $0.83 per share, according to figures compiled by Thomson Reuters. Analysts' estimates typically exclude special items.

The company's revenue for the quarter fell 2 percent to $12.61 billion from $12.83 billion last year. The Street was looking for revenues of $12.84 billion for the quarter. Fourth-quarter revenues were flat on a currency-neutral basis.

After double-digit growth over the past several years, the lifestyle business declined in the fourth quarter across men's, women's, and Jordan, more than offsetting strong growth in sport performance business.

Revenues for the NIKE Brand were $12.1 billion, down 1 percent from last year. O a currency-neutral basis, revenues grew 1 percent with growth in Greater China, APLA and EMEA, partially offset by a decline in North America.

NIKE Direct revenues were $5.1 billion, down 8 percent due to declines in NIKE Brand Digital of 10 percent and NIKE-owned stores of 2 percent, while Wholesale revenues grew 5 percent to $7.1 billion.

NIKE Digital business has grown at an approximately 26 percent CAGR since fiscal 2019, but the fourth-quarter revenues were hit by softer traffic, higher promotions, and lower sales of certain classic footwear franchises.

Revenues for Converse were $480 million, down 18 percent on a reported basis and down 17 percent on a currency-neutral basis, primarily due to declines in North America and Western Europe.

As of May 31, inventories for NIKE were $7.5 billion, down 11 percent compared to the prior year, reflecting a decrease in units.

On the NYSE, Nike shares closed Thursday's regular trading at $94.19, up 0.14 percent. Folloing the earnings report, the shares were down 12.39 percent in the extended trading, at $82.52.

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