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Written by Ananya Maryam Rajesh and Juviria Tabassum
Nike on Thursday forecast a surprise drop in sales in fiscal 2025, with its direct-to-consumer marketing strategy faltering and the sportswear giant facing stiff competition from newer brands like On and Hoka, sending its shares down 12% after hours.
He put this up Nike (NYSE:) is on track to lose nearly $15 billion in market value if Friday’s losses continue. The company also beat fourth-quarter revenue estimates.
Nike’s efforts to increase sales through its direct-to-consumer channel have failed to reap rewards as customers become more selective and migrate to the more trendy and innovative On and Deckers’ Hoka brands.
According to GlobalData, Nike’s share of the U.S. athletic footwear market was 34.97% in 2023, down from 35.37% in 2022 and 35.40% in 2021.
Nike executives said on a post-earnings call that annual revenue will also be impacted by weak demand in international markets, including China, where brick-and-mortar traffic is down double digits from a year ago due to continued macro uncertainty.
“I think they know where the problems are, but they’re having trouble right now generating demand,” Morningstar analyst David Swartz said.
Nike expects a mid-single-digit decline in annual revenue, compared to estimates of a 0.91% rise, and a decline of about 10% in first-quarter revenue, compared to expectations of a 3.16% decline.
Company executives emphasized that its investments to introduce new product lines and attract customers will take some time to reignite the brand’s momentum.
“Nike is trying to sell a story that they’re reinventing… but the numbers they’ve given… for 2025 really indicate a company that’s having some problems and that the things they’re doing aren’t going to do well in the future.” This year, GlobalData analyst Neil Saunders said.
The company is betting on its success in hosting the Olympics, adding that its brand marketing campaign at the mega sporting event will be “hard to miss.”
Nike said in April that it would spend more on marketing and media at the upcoming Paris Olympics than at any previous Games, in an effort to boost sales and claw back market space from emerging brands.
The company’s quarterly net revenue fell 1.71% to $12.61 billion, compared to analysts’ average estimate of $12.84 billion, according to LSEG data.
However, the Air Jordan maker’s strategy of boosting wholesale partnerships helped boost revenue in the segment to 5% during the fourth quarter, while growth in its direct-to-consumer business declined 8%.
Nike’s $2 billion cost-saving plan, including layoffs, helped lift the company’s adjusted earnings to $1.01, beating estimates of 83 cents.
“The organizational reset (and) headcount dimension of the cost savings plan is behind us,” CFO Matthew Friend said.
