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Nike reported a steeper than expected drop in sales for its most recent quarter, extending a tumultuous several months for the world’s largest sportswear maker.
Revenues at Nike for the three-month period to the end of August fell 10 per cent to $11.6bn compared to the same quarter a year ago, while net income dropped 28 per cent to $1.1bn.
The earnings come as Nike is preparing for a new chief executive. John Donahoe, who held the top job for more than four years, said he will retire in two weeks and be replaced by company veteran Elliott Hill.
The leadership shuffle follows months of sluggish sales as Nike trainers became outmoded in an otherwise thriving sneaker industry, the result of slowing innovation and an out-of-step retail strategy that it has been working to correct.
Matthew Friend, Nike’s chief financial officer, said: “A comeback at this scale takes time, but we see early wins — from momentum in key sports to accelerating our pace of newness and innovation.”
Randal Konik, managing director at Jefferies, on Monday wrote Nike shares were in “no man’s land” and that the company’s “product line-up ahead for calendar [20]25 and beyond remains unclear”.
It was also dealt a blow by Major League Baseball’s announcement on Monday that teams would phase out the Nike-supplied uniforms that debuted this spring. The kits, featuring small lettering and see-through fabrics, were unpopular with players and fans. Nike will continue to supply uniforms to the league but will revert to using fabrics found in earlier editions from next season.
Wall Street analysts polled by S&P Capital IQ expected profits of $786mn and $11.7bn in revenue for the three months ended in August. Shares of Nike fell about 1.6 per cent to $87 in after-hours trading on Tuesday. By Tuesday’s close, the company’s shares had fallen roughly 18 per cent this year, while the S&P 500 is up more than 20 per cent.
Analysts were closely watching the earnings report on Tuesday, which covers the critical back-to-school season, particularly in North America, and typically serves as an indicator of how popular Nike’s products are among young consumers.
Nike’s board of directors held quiet discussions this summer about succession planning for Donahoe, just weeks after co-founder and largest individual shareholder Phil Knight publicly declared his full support for the former eBay and Bain executive.
Hill, a Texas native, joined Nike as an intern after business school and worked his way up from sales to executive leadership before retiring in 2020. He will rejoin Nike on October 14.
While Nike employees and much of Wall Street celebrated news of Hill’s appointment — the company’s shares surged 6 per cent the day after it was announced — analysts have cautioned that the effects of his leadership may not be felt for months.
Nike on Tuesday said it would postpone a planned investor day, initially scheduled for November, as the company undergoes its executive transition. It did not give a new date for the presentation.