Nike (NKE) earnings Q4 2024

Nike on Thursday reported its slowest annual sales growth in 14 years, excluding the Covid-19 pandemic, as the sneaker giant warned of “challenges” that led it to cut its current year outlook.

“We are driving better balance across our portfolio. While we are encouraged by our progress, our fourth quarter results highlighted challenges that have led us to update our Fiscal ’25 outlook,” finance chief Matthew Friend said in a news release. “We are taking actions to reposition NIKE to be more competitive, and to drive sustainable, profitable long-term growth.”

Nike’s exact guidance is unclear. The retailer typically releases its guidance during its earnings call, which is scheduled for 5 p.m. ET.

Last quarter, the company said that it expects revenue and earnings to grow in fiscal 2025 but didn’t say by how much. It said that its expecting revenue in the first half of fiscal 2025 to be down low single digits, reflecting “a subdued macro outlook around the world.” 

Shares were down about 6% in extended trading.

For the fiscal fourth quarter, the company handily beat earnings estimates as its cost-cutting efforts continue to bear fruit, but Nike fell short on revenue estimates.

Here’s how Nike did during the period compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: $1.01 adjusted vs. 83 cents expected
• Revenue: $12.61 billion vs. $12.84 billion expected

The company’s reported net income for the three-month period that ended May 31 was $1.5 billion, or 99 cents per share, compared with $1.03 billion, or 66 cents per share, a year earlier. 

Sales dropped to $12.61 billion, down about 2% from $12.83 billion a year earlier.

In fiscal 2024, Nike posted sales of $51.36 billion, which is flat compared to the prior year. It’s the slowest pace of growth the company has seen since 2010, excluding the Covid-19 pandemic.

Nike executives attributed the sales miss to a range of factors. They said its lifestyle business declined during the quarter and that momentum in its performance business, such as its basketball and running shoes, wasn’t enough to offset it. It saw weakness in online sales in April and May because it had a higher share of lifestyle products. It also saw traffic in China decline beginning in April due to macro conditions in the region.

Despite the traffic decline in China, sales in the region exceeded Wall Street expectations, according to StreetAccount, coming in at $1.86 billion, compared with estimates of $1.79 billion. It was the only geographical segment to top estimates for the period.

Sales in North America, its largest market, came in at $5.28 billion, below StreetAccount expectations of $5.45 billion. 

In Europe, Middle East and Africa, Nike posted revenue of $3.29 billion, compared to estimates of $3.32 billion. In Asia Pacific and Latin America, Nike saw $1.71 billion in sales, compared to estimates of $1.77 billion. 

Under the strategy shift, Nike had been working to drive sales through its own website and stores rather than through wholesalers like Foot Locker, but it recently began walking back that initiative, telling CNBC in April that it went too far when it moved way from wholesalers.

The strategy can be more profitable and gives companies better control over their brands and customer data, but it can also create logistical headaches and come with unexpected – and costly – hiccups. 

During the quarter, Nike direct revenues came in at $5.1 billion, down 8% compared to the prior year period. Meanwhile, wholesale revenue was up 5% to $7.1 billion, reflecting Nike’s change of heart on direct selling.

According to some analysts, the company’s focus on building out its direct sales strategy led Nike to take its eyes off of innovation – the main attribute that had long made the company as special as it is. 

As the retailer churned out more and more old favorites, such as the Air Force 1, upstarts like On Running and Hoka wowed runners with brand new designs – and snatched them up as customers. 

Nike has said that it would reduce the amount of products it had on the market in favor of new innovations and is betting that a suite of new styles, along with the 2024 Paris Olympics, can get the company back on solid footing. 

“We are taking our near-term challenges head-on, while making continued progress in the areas that matter most to NIKE’s future – serving the athlete through performance innovation, moving at the pace of the consumer and growing the complete marketplace,” CEO John Donahoe said in a release. “I’m confident that our teams are lining up our competitive advantages to create greater impact for our business.”

Some of Nike’s challenges are also outside of its control. It’s contended with a rough macroeconomic environment that’s seen consumers pull back on new sneakers, and it also may be finding itself on the wrong side of trends. Some analysts expect the overall athletic category to face a slowdown this year as denim makes a comeback with consumers and shoppers look to dress up after years of dressing down. 

In the meantime, Nike has focused on cutting costs so it can at least deliver strong profits against unsteady sales. 

In December, it announced a broad restructuring plan to reduce costs by about $2 billion over the next three years. Two months later, it said it was shedding 2% of its workforce, or more than 1,500 jobs, so it could invest in its growth areas, such as running, the women’s category and the Jordan brand.

— Additional reporting by CNBC’s Sara Eisen and Jessica Golden.