Nike’s results beat modest estimates on Thursday and its shares briefly jumped, but the company quickly dashed investors’ hopes and sent its shares lower when a top executive predicted revenue would fall by double digits in the third quarter .
New Nike CEO Elliott Hill has warned of near-term difficulties as the struggling sportswear seller works to revive tepid demand for its brands. Nike shares jumped 11% immediately following the earnings release, but gave up those gains after Hill and Chief Financial Officer Matthew Friend lowered their expectations.
Hill said in his first conference call since taking the helm in October that Nike “has lost its obsession with sports,” vowing to right the ship by refocusing its business on sports and selling more items at high prices.
Nike’s quarterly profit exceeded modest expectations. Revenue also fell less than expected as new releases of performance and running shoes attracted buyers.
Since the start of the year, Nike shares have fallen nearly 30%. Analysts said Hill faced harsh criticism and a long slog to recoup the lost market.
Hill said on the call that he is prioritizing rebuilding Nike’s retail partnerships, driving innovation and ensuring discounts and promotions are limited to retail times. traditional, and not at the constant rates at which they have been employed in recent times.
“We’ve become way too promotional,” Hill said, speaking in a sharp, passionate tone. “The level of markdowns not only impacts our brand, but disrupts the entire market and our partners’ profits.”
As competitors release more comfortable, better-cushioned shoes, Nike is working to regain its market dominance, shelling out money to introduce new products like the Air Max 95 and to promote core franchises like Jordans and Pegasus.
Last month, the Hill-led company announced it would double down on three ongoing franchises — Pegasus, Structure and Vomero — by releasing various iterations of each shoe next year, at different price points.
Hill is popular with retailers, who are optimistic about his ability to revive the third-party partnerships that Nike abandoned in 2020, when it pivoted to its direct-to-consumer business.
At the time, some retailers quickly stocked their shelves with trendy competitors like On and Hoka, but others struggled.
Foot Locker, for example, continued to rely heavily on Nike in 2022 and 2023, purchasing 65% of its athletic apparel from the company.
He blamed weak demand for Nike shoes when he reported disappointing sales earlier this month. Foot Locker executives said at the time that they looked forward to working with Hill.
Nike’s second-quarter net revenue fell 7.7% to $12.35 billion. Analysts had expected a decline of 9.41% to $12.13 billion, according to estimates compiled by LSEG.
Nike reported earnings per share of 78 cents, compared with an estimate of 63 cents per share, according to analyst estimates compiled by LSEG.
“If you really look at it, the numbers are not good,” said Jessica Ramirez, principal analyst at Jane Hali & Associates. “But it’s better than most people feared.”
