Nike reveals major product changes to repair its declining sales

The sportswear brand is having an off season, and its laying out a new game plan to win back its customers.

Jun 29, 2024 - 03:30

0 8

Nike reveals major product changes to repair its declining sales

Nike (NKE) , the top sportswear brand in the world, is facing significant headwinds amid a major change in consumer behavior.

It appears that consumers are tightening their spending on the brand, which is starting to hurt the company’s pockets. In its fiscal 2024 earnings report, Nike revealed that its total sales in North America decreased by 1% year-over-year, with footwear sales declining by 6%.

Nike’s direct revenues earned from consumers during the quarter also took a major hit, declining 8% year-over-year, while the company’s total revenue shrunk by 2%.

During a recent earnings call, Nike CEO John Donahoe attributed the company’s weaker quarter performance to declines in its lifestyle shoe product.

“For the quarter, we saw strong gains within (the) performance product. However, this was more than offset by declines in lifestyle,” said Donahoe. “These declines had a pronounced impact on our digital results. These factors, when combined with increased macro uncertainty and worsening foreign exchange, have caused us to reduce our guidance for fiscal '25.”

The company also revealed during the call that it expects revenue during the current quarter to decline by 10%, a much bigger decrease than the 3.2% decline analysts predicted. Nike also said that it is expecting fiscal year 2025 revenue “to be down mid-single digits.”

Nike shoes are displayed at a Macy's store.
Justin Sullivan/Getty Images

Shortly after Nike revealed its updated guidance, the company’s share price declined by roughly 20%. Nike is now selling for around $75 per share; its previous closing price was about $94 a share.

“The gut punch here, though, is in the revenue for the quarter reported, and the revenue going forward both in the current quarter and full-year guidance,” said day trader and long-term investor Stephen Guilfoyle on TheStreet Pro. “Nike has problems, and I am not sure they easily recover without making significant changes.”

Nike reveals game plan to attract back customers

In an effort to lure back customers, who are battling record inflation, Nike is planning to launch footwear at more affordable prices.

“Our teams are also attacking opportunities across price points, including a refreshed lineup of new footwear products below $100,” said Nike Chief Financial Officer Matthew Friend during the earnings call. “Building on this quarter's double-digit growth, we plan to scale new performance and lifestyle models in spring '25. Added up, we expect the business contribution from new products to more than double from the start of fiscal '24 to where we end the year in fiscal '25.”

Friend also said that Nike will focus on innovation and create more “newness” for its consumers by creating a “better balance” between its performance, lifestyle brands, and high and low price points. He also said that Nike will lower its supply as it focuses on this new initiative.

“It's going to be challenging over the next couple of quarters,” said Friend during the call.

More Retail:

The earnings report from Nike comes after the company laid off over 1,600 employees in February to cut costs. In December, Nike revealed that it was looking to save $2 billion in costs over the next three years amid a “competitive environment.”

Amid increased competition from its competitors, Nike recently upped its game with a major investment. Nike reportedly landed an eight-year $28 million endorsement deal with WNBA star Caitlin Clark, who has recently made history for being the fastest WNBA player. The deal involves the creation of her own signature shoe that consumers will be able to purchase.

Original Post