Sportswear giants Nike reported higher profits due to cost-cutting efforts, but its shares fell sharply following a poor outlook despite hopes for a boost from the upcoming Olympic Games.
Nike, which has faced criticism for a lack of innovation and strategic missteps, reported a decline in quarterly revenues, citing several headwinds. These included a drop in Nike’s lifestyle business, a decline in digital sales, and weakness in key markets such as China, said Chief Financial Officer Matthew Friend. These factors influenced Nike’s dampened fiscal 2025 projections.
“We are managing a product cycle transition with complexity amplified by shifting channel mix dynamics,” Friend told analysts on a conference call. “A comeback at this scale takes time.”
Nike reported profits of $1.5 billion in the fiscal fourth quarter of 2024 ending May 31, a surge of 45 percent from the year-ago period, following price increases on some goods and lower ocean freight costs. However, revenues dropped two percent to $12.6 billion, with sales falling in both North America and the Europe, Middle East & Africa regions.
For the first half of fiscal 2025, Nike now expects a decline in sales of high single digits, Friend said. In March, Nike projected a decline in the “low single digits.” Executives said the company expects an improvement in the second half of the year, with Friend stating that the full-year drop would be “mid single digits.”
Nike Chief Executive John Donohoe expressed confidence in the company’s product pipeline, vowing an impressive marketing blitz at the upcoming Olympic Games in Paris. “Our brand storytelling will be bold and clear, with sport and athletes at the very center of it all,” Donahoe said. “We will cut through the clutter to create powerful energy for the Nike brand.”
Neil Saunders, analyst at GlobalData, welcomed the higher profits but noted that “a brand like Nike cannot cut its way back to success.” He emphasised the importance of great new products to stimulate buying behavior and criticized the company for cutting back wholesale distribution, which he said hurt market share.
