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Nike reported on Thursday that its profits rose due to cost-cutting, but its shares fell sharply on a gloomy outlook for the company despite expectations of a boost from the upcoming Olympics.
The sports giant has faced criticism recently for a lack of innovation and strategic missteps, with executives citing a host of headwinds as it reported a decline in quarterly revenue.
Those factors included a decline in Nike’s lifestyle business, a drop in digital sales and weakness in some key markets such as China, Chief Financial Officer Matthew Friend said, adding that they led Nike to lower its fiscal 2025 forecast.
“We are managing a product cycle transition compounded by changes in channel mix dynamics,” Freund told analysts on a conference call. “A recovery of this magnitude will take time.”
Nike reported a profit of $1.5 billion in the fourth quarter of fiscal 2024, which ended May 31. That profit was up 45% from the same period last year, thanks to higher prices for some goods and lower ocean shipping costs.
But revenue fell 2% to $12.6 billion, with sales falling in North America and Europe, the Middle East and Africa.
Freund said Nike now expects sales to be down by a high-single digit in the first half of fiscal 2025. In March, Nike expected sales to be down by a “low-single digit.”
Executives said the company expects results to improve in the second half of the year, and Friend said full-year results will be down in the “mid-single digits.”
Nike Chief Executive John Donohue said the company’s product line is sure to wow consumers and he promised an impressive marketing push at the upcoming Paris Olympics.
“Our brand story will be bold and clear, centered around sports and athletes,” Donahoe said. “We will break through the clutter and create powerful energy for the Nike brand.”
Neil Saunders, an analyst at GlobalData, welcomed the profit growth but noted that “a brand like Nike cannot regain its success by cutting costs”.
Saunders said good new products were essential to “stimulate buying behavior,” and he also said the company had gone too far in cutting wholesale distribution, hurting market share.
“Nike is a powerful brand that dominated the sports and sneaker market with a constant stream of new products, interesting stories and strong marketing,” he said. “In the past year or so, Nike’s momentum has faded and its influence has become much smaller.”
Nike shares plunged 11.4% in after-hours trading.
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