Although Nike is ranked as the number one sportswear company in the U.S., it's no secret that it has struggled to get its sales figures on a positive track.
The renowned sportswear brand has experienced big revenue losses for the last few quarters due to a failing business strategy.
Additionally, increasing competition in the sportswear market due to growing rival brands like Hoka and OnRunning ONON has lit a fire under Nike to promote newness by focusing on developing more innovative products to regain lost clientele.
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In its prior earnings report, Nike acknowledged its hardships and lowered its outlook for the just-concluded quarter, confirming yet another quarter filled with declines.
Although expectations were lowered, Nike still holds hope for its future. Still, its latest earnings report, in which Nike made a major announcement that analysts and investors didn't see coming, may have crushed any outside optimism left in the company.
Nike reports Q1 earnings for 2025 after hiring a new CEO
According to Nike's (NKE) Q1 earnings report for fiscal 2025, revenues decreased by 10% compared to the year prior, with Nike-direct revenues declining 13% and wholesale revenues down by 8%.
Although Nike reported earnings per share of $0.70, a 26% decrease year over year, the company still exceeded analysts' expectations of $0.52.
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According to Nike's previous outlook for 2025, revenues were as predicted, but sales and traffic didn't meet the forecasted numbers.
Nike reported a 13% slump in direct-to-consumer sales and an 8% decline in wholesale revenues compared to last year.
Although Nike said it would invest in developing more innovative products, the company will be more cautious with its expenses, and its employees seem to be the ones taking the heat.
In its earnings, Nike reported a 2% decline in SG&A and a 15% increase in brand marketing expenses to invest in key sports events.
However, Nike decreased its operating overhead expenses by 7%, which was achieved through reducing wage-related costs.
Nike makes a shocking announcement that throws everyone for a loop
In addition to declining sales, Nike has also undergone multiple big changes, including hiring its new CEO, Elliott Hill, last month.
Although Nike expresses optimism about its latest executive transition, the company doesn't expect Hill's new leadership to impact its performance until fiscal 2026.
Therefore, Nike announced on Tuesday that it would withdraw its full-year outlook and postpone its investor day to allow Hill's transition to take full shape.
"We all look forward to working with Elliott as he leads NIKE's next chapter. Given our CEO transition, and with three quarters left in the fiscal year, we are withdrawing our full-year guidance. We intend to provide quarterly guidance for the balance of the fiscal year," said Nike's Executive VP and CFO Matthew Friend in Nike's Q1 earnings call.
"This provides Elliott with the flexibility to reconnect with our employees and teams, evaluate the current strategies and business trends, and develop our plans to best position the business for fiscal '26 and beyond. To that end, we have also decided to postpone our Investor Day," Friend added.
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According to Nike's Q2 guidance, revenues are predicted to decrease by an average of 9%.
The sportswear company also expects SG&A to be flat compared to the prior year but will continue prioritizing investing in creating more innovative products while tightening overhead operations expenses.
As of Wednesday afternoon, Nike's stock declined approximately 6.3% and is down around 22.5% year-to-date.
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