Next Month's 'Investor Day' Event Also Canceled
Challenges Include Restoring Wholesale Partnerships and Employee Morale
Nike reaffirmed its management crisis in its earnings announcement on the 1st (local time). With the appointment of a new leader as a relief pitcher imminent, the scheduled 'Investor Day' event and annual sales guidance were also withdrawn. This is interpreted as an intention to focus the company's resources and capabilities on organizational restructuring and strategic resetting under the new management system.
According to Nike's announcement of the first quarter results for fiscal year 2025 (June to August 2024), sales plummeted 10% year-on-year to $11.59 billion (approximately 15 trillion won). This was below the expert forecast of $11.64 billion. Net profit during the same period also fell 28%, remaining at $1.05 billion. In particular, sales in the U.S. and European markets dropped 14%, and sales in the Greater China region fell by 3%. The stock price, which closed slightly higher that day, plunged about 6% in after-hours trading.
The outlook is not good either. Nike expects sales in the second quarter of fiscal year 2025 (September to November 2024) to decline by 8-10%, and gross profit to decrease by about 1.5%. The previous earnings forecast, which anticipated a 10% drop in annual sales for fiscal year 2025, was also withdrawn, and the 'Investor Day' event scheduled for November was postponed.
Dave Wagner, head of equities at Aptus Capital Advisors, said, "I was quite disappointed with Nike's results this time," adding, "Neither the numbers nor the qualitative aspect of canceling Investor Day make this a good earnings report."
Recently, Nike has been going through a turbulent period. Last month, CEO John Donahoe announced his resignation taking responsibility for the poor performance, and former executive Elliott Hill, who had been with Nike for 32 years, took the helm. The news of the leadership change caused the stock price to jump about 8% in after-hours trading, reflecting market enthusiasm, but it is assessed that the new CEO faces many challenges to resolve.
In particular, restoring wholesale partnerships with vendors who have sold Nike products, boosting employee morale lowered by successive restructurings, and launching innovative new products are cited as major tasks. Under Donahoe's leadership, Nike restricted product sales to only its own website and stores rather than shoe specialty retailers like Foot Locker, resulting in significant market share losses to competitors. According to StockX, the number one resale platform in the U.S., sales of Nike and Jordan series in the first half of this year decreased by 21% compared to the same period last year, while competitors Asics and Adidas increased by 600% and 90%, respectively.
Local media such as The Wall Street Journal (WSJ) pointed out, "Nike's annual sales increased by more than 31% under Donahoe's leadership, but this was the result of mass-producing existing franchise products like Air Force 1 and Air Jordan 1," adding, "The scarcity value of limited edition Jordan series has diminished, and the phenomenon of sold-out products is now a thing of the past."
Matthew Friend, Nike's Chief Financial Officer (CFO), said in a conference call, "By postponing the Investor Day event, Elliott has been able to reconnect communication channels with employees, assess current business strategies and trends, and secure flexibility to establish business plans beyond fiscal year 2026," adding, "However, since we plan to introduce and expand new products and innovations across the market, total margins are expected to show a declining trend compared to the previous year for the time being."
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