TLDR:
- Nike shares drop 6% in premarket trading after withdrawing annual revenue target
- Company postpones investor day scheduled for Nov. 19
- Incoming CEO Elliott Hill to evaluate Nike’s strategies and business trends
- Nike faced with increased competition from brands like On Holding and Hoka
- Q1 revenue missed estimates, with declines in both direct-to-consumer and wholesale divisions
Nike, the global sportswear giant, has withdrawn its annual revenue target and postponed its investor day, causing a stir in the financial markets. The company’s shares dropped approximately 6% in premarket trading following the announcement, which comes as Nike prepares for a leadership transition.
Elliott Hill, a veteran executive, is set to take over as CEO on October 14, replacing John Donahoe. The decision to withdraw guidance and postpone the investor day, originally scheduled for November 19, is intended to give Hill “much-needed flexibility” to evaluate Nike’s strategies and business trends, according to CFO Matthew Friend.
The company’s recent performance has been less than stellar. Nike reported fiscal first-quarter earnings per share of $0.70, surpassing Wall Street’s estimate of $0.52, but this still represented a 26% decline from the previous year. Revenue for the quarter came in at $11.59 billion, falling short of analyst expectations of $11.65 billion and marking a 10% decrease year-over-year.
Both Nike’s direct-to-consumer and wholesale divisions experienced sales slumps. Nike Direct revenues were $4.7 billion, a 13% decline from the same quarter a year ago, while wholesale revenues dropped 8% to $6.4 billion.
The sportswear market has become increasingly competitive in recent years, with brands like On Holding and Hoka gaining market share, particularly in the high-performance and innovative running shoes categories. This increased competition has put pressure on Nike’s sales growth and stock performance.
Nike’s stock has struggled this year, falling more than 25% prior to the CEO change announcement on September 19. The company has reported single-digit revenue growth, or worse, for six consecutive quarters, highlighting the challenges it faces in maintaining its market dominance.
Nike expects revenue to fall in a range of 8% to 10% for the current quarter, which is weaker than Wall Street’s initial expectations of a 6.7% decline. Friend acknowledged that revenue expectations have moderated since the start of the year, citing factors such as traffic trends on Nike’s digital retail platform and marketplace sales trends.
The postponement of the investor day has left many questions unanswered about Nike’s turnaround strategy. Investors and analysts were hoping for clarity on the company’s plans to address its recent challenges and reinvigorate growth.
Some analysts, like Randal Konik from Jefferies, believe that it may take some time before Hill’s impact on Nike’s performance becomes evident. Konik suggests that shares are likely to remain range-bound for several quarters.
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