Shares of Nike Inc. experienced a downturn of approximately 6% in extended trading on Tuesday on the NYSE and are currently down around 5% in pre-market activity. This decline followed the company's cautionary remarks on weak second-quarter revenues, the withdrawal of its fiscal 2025 revenue forecast, and the postponement of its investor day. These actions were taken despite the company's earnings beating market expectations in the first quarter, which otherwise posted weak results.
The announcements were made to allow Nike's newly appointed CEO, Elliott Hill, the flexibility to reconnect with employees, assess current strategies and business trends, and devise plans to optimally position the company for fiscal 2026 and beyond. Hill, a Nike veteran with over 32 years at the company, was announced as President and Chief Executive Officer on September 19, effective October 14. He succeeds John Donahoe, who is stepping down.
During Nike's first-quarter earnings call, Executive Vice President and Chief Financial Officer Matthew Friend stated, “We look forward to working with Elliott as he leads Nike's next chapter. Given our CEO transition and with three quarters remaining in the fiscal year, we are withdrawing our full-year guidance. We will provide quarterly guidance throughout the rest of the fiscal year.”
**Outlook**
For the second quarter, Nike anticipates revenues to decline in the range of 8% to 10%, with gross margins expected to decrease by approximately 150 basis points. The company noted that higher promotions, challenges with channel mix, and supply chain deleverage will more than counterbalance lower product costs and diminishing benefits from strategic pricing actions.
Looking ahead, Nike expressed a moderated outlook for the near term but maintained optimism regarding long-term opportunities in the sports market and specifically in China. Previously, for fiscal 2025, the company had expected a mid-single-digit revenue decline, with the first half down by high single digits. However, Nike highlighted that its revenue expectations have tempered due to traffic trends on Nike Digital, retail sales trends across the marketplace, and final order books for spring. Franchise management actions are set to continue throughout the year.
Despite the challenges, Nike foresees slight second-half improvement in revenue trends compared to the first half as it plans to roll out and scale innovations across the market. Nevertheless, gross margins are expected to decline year-over-year due to incremental headwinds. The Jordan brand and Nike Digital are projected to see double-digit declines for fiscal 2025. Additionally, the company’s men's and women's lifestyle businesses, which experienced double-digit drops in the first quarter, are expected to continue this trend throughout the year.
**Q1 Results**
In the first quarter, Nike's net income fell to $1.05 billion or $0.70 per share, down from $1.45 billion or $0.94 per share in the same quarter last year. Analysts anticipated an earnings per share of $0.52 for the quarter. Gross margins, however, expanded by 120 basis points to 45.4%, primarily due to lower product costs for the Nike brand, reduced warehousing and logistics expenses, and benefits from prior strategic pricing actions.
Quarterly revenues stood at $11.59 billion, a decline of 10% on a reported basis and 9% on a currency-neutral basis. Analysts had expected revenue of $11.65 billion for the quarter. Nike Brand revenues decreased by 10%, reflecting declines across all geographies. Additionally, Nike Direct revenues fell 13%, largely due to a 20% drop in Nike Brand Digital, which was partially offset by a 1% increase in Nike-owned stores. Wholesale revenues dropped by 8%.
Regionally, North American revenue fell by 11%, with a 12% decline in EMEA, a 2% drop in APLA, and a 3% decline in Greater China.
On the NYSE, Nike shares closed Tuesday’s regular trading session at $89.13, up 0.83%. Following the earnings report and conference call, the shares declined by 5.92% in extended trading, to $83.85. In pre-market activity on Wednesday, the shares are currently trading at $84.50, down 5.2%.
