Sign in

    Nike Inc (NKE)

    You might also like

    NIKE, Inc. is a global leader in the design, development, marketing, and selling of athletic footwear, apparel, equipment, accessories, and services . The company's principal business activity revolves around performance athletic products under the NIKE Brand, Jordan Brand, and Converse . NIKE's operations are organized into geographic segments, including North America, Europe, Middle East & Africa (EMEA), Greater China, and Asia Pacific & Latin America (APLA), with significant contributions from the North American market .

    1. NIKE Brand - Focuses on performance athletic footwear, apparel, and equipment, contributing significantly to the company's overall revenue .

      • Footwear - Offers a wide range of performance athletic shoes designed for various sports and activities.
      • Apparel - Provides athletic clothing designed for performance and comfort.
      • Equipment - Includes sports equipment designed to enhance athletic performance.
    2. Jordan Brand - Specializes in athletic and casual footwear and apparel, known for its iconic designs and cultural influence .

    3. Converse - Offers casual sneakers, apparel, and accessories, known for its classic and timeless style .

    Initial Price$83.45August 29, 2024
    Final Price$78.77November 29, 2024
    Price Change$-4.68
    % Change-5.61%

    What went well

    • Nike is accelerating strategic actions in key markets like North America and Greater China, with confidence in new leadership and ability to execute aggressive actions to drive growth.
    • The company is rebuilding strong relationships with wholesale partners, delivering innovative products and mutually profitable growth, with positive reception from partners.
    • Nike is confident in its upcoming product pipeline and innovation, particularly in running and basketball, expected to drive growth and offset pressures from repositioning the business.

    What went wrong

    • Nike expects significant near-term revenue and margin headwinds due to restructuring and repositioning actions, with revenues projected to decline low double digits in Q3 and even greater headwinds anticipated in Q4 across revenue, margin, and demand creation expenses.
    • The acceleration of reducing inventory in classic footwear franchises is causing greater sales deceleration, particularly impacting NIKE Digital, and there is uncertainty about when new innovative products will reach sufficient scale to offset this pressure, potentially leading to continued sales declines into fiscal 2026.
    • Increased competition in key markets like Greater China, from both international and local players, along with a promotional environment, may hinder Nike's ability to return to growth in these regions, adding to the company's challenges in reenergizing brand momentum.

    Q&A Summary

    1. Sales Impact and New Product Timing
      Q: How will new products offset sales pressure in 2026?
      A: Elliott Hill acknowledged that accelerating lifestyle initiatives may pressure 2026 sales but expressed confidence in upcoming products. He highlighted excitement about new offerings in running, training, and sportswear, which are expected to gain sufficient scale to offset pressures as they reach the market in fall '25. Cross-functional teams are effectively bringing innovative products to market, which is the quickest path to returning to health.

    2. Margin Prioritization Over Sales
      Q: Are you focusing on margins before sales, even if sales decline?
      A: Elliott Hill confirmed a focus on achieving healthy margins before driving top-line growth. He emphasized the importance of innovation at scale to replace liquidated products by fall next year. Matthew Friend added that while revenues are expected to be down low double digits and margins down 300 to 350 basis points in Q3, these actions are aimed at returning to a full-price business, which is foundational for future growth.

    3. Near-Term Actions for Long-Term Gain
      Q: Will you take short-term hits to ensure long-term success?
      A: Elliott Hill stated they are acting with a sense of urgency, investing in product innovation, marketing, and marketplace management despite near-term challenges. He believes these moves are necessary to drive the brand forward. Matthew Friend explained that while there are near-term headwinds due to repositioning, they expect these to end as they recalibrate channels and product portfolio, leading to future opportunities once actions are completed.

    4. Regional Strategies: North America and China
      Q: What specific actions are planned for North America and China?
      A: In North America, a new leader, Tom , is aggressively working on marketplace cleanup, rebuilding wholesale relationships, and elevating NIKE Direct starting in January. In China, they are investing in local product innovation via the Geo Express Lane and the NIKE Sports Research Lab, focusing on creating products "of China for China." They are also resetting consumer-led concepts to drive performance and productivity, partnering closely with Topsports and Pou Sheng.

    5. Inventory Realignment and Growth Timeline
      Q: What's the timeline to realign inventory and return to growth?
      A: Elliott Hill emphasized a focus on five key fields of play—running, basketball, football, training, and sportswear—segmented by men's, women's, and kids'. While not specifying an exact timeline, he expressed excitement about the merchandising opportunities these areas present and indicated that they are a near-term focus, which will unlock incremental growth moving forward.

    6. Margin Recapture and Efficiency Opportunities
      Q: How will you improve margins and efficiency?
      A: Elliott Hill mentioned appointing Venki as Chief Supply Chain Officer to focus on opportunities for margin expansion across factories, transportation, and logistics. Matthew Friend noted that restoring a higher percentage of full-price sales—moving away from the current 50% off-price mix—will significantly improve profitability, especially within NIKE Direct. They are also working to reduce fulfillment costs and rely less on paid media by leveraging brand investments to drive organic traffic.

    7. Investment Phasing and Cost Management
      Q: How are you pacing investments to return to growth?
      A: Elliott Hill outlined plans to shift dollars from performance marketing to brand marketing, investing in key "fields of play" and focusing on five sports and three key countries. Matthew Friend added that despite SG&A being down 3%, demand creation is up 1%, reflecting prioritized investments. They are also making meaningful investments to clean up the marketplace, including liquidating inventory and planning for markdowns, which are reflected in their Q3 guidance and expected to continue in the near term.

    Guidance Changes

    Quarterly guidance for Q3 2025:

    • Revenue: Expected to be down low double digits year-over-year (lowered from down 8% to 10% )
    • Gross Margin: Expected to decline by 300 to 350 basis points year-over-year (lowered from down ~150 basis points )
    • SG&A: Expected to be slightly down year-over-year (lowered from roughly flat year-over-year )
    • Other Income and Expense: $30 million to $40 million (no change from $30 million to $40 million )
    • Fourth Quarter Outlook: Greater headwinds expected in Q4 2025 (no prior guidance)
    NamePositionStart DateShort Bio
    Mark ParkerExecutive Chairman1979Mark Parker has been with NIKE since 1979, serving in various roles including President and CEO from 2006 to January 2020. He became Executive Chairman in 2020 .
    John Donahoe IIPresident and Chief Executive OfficerJanuary 2020John Donahoe joined NIKE's Board in 2014 and became President and CEO in January 2020. He was previously CEO of ServiceNow and eBay .
    Matthew FriendExecutive Vice President and Chief Financial Officer2009Matthew Friend joined NIKE in 2009 and became CFO in 2020. He previously worked at Goldman Sachs and Morgan Stanley .
    Monique MathesonExecutive Vice President, Chief Human Resources Officer1998Monique Matheson joined NIKE in 1998 and has been Chief Human Resources Officer since 2017. She oversees global HR strategy .
    Ann MillerExecutive Vice President, Chief Legal Officer2007Ann Miller joined NIKE in 2007 and became Chief Legal Officer in 2022. She has held various roles in NIKE's legal department .
    Heidi O'NeillPresident, Consumer, Product & Brand1998Heidi O'Neill joined NIKE in 1998 and has been President, Consumer, Product & Brand since 2023. She leads global consumer teams and brand marketing .
    Craig WilliamsPresident, Geographies & Marketplace2019Craig Williams joined NIKE in 2019 and became President, Geographies & Marketplace in 2023. He oversees geographic units and supply chain .
    Elliott HillPresident and Chief Executive OfficerOctober 14, 2024Elliott Hill was appointed President and CEO effective October 14, 2024. He has over 32 years at NIKE and returned after founding Open Road Resources, LLC .
    John DonahoeAdvisor (until January 31, 2025)September 19, 2024John Donahoe transitioned to an advisory role on September 19, 2024, after serving as President and CEO. He will retire on January 31, 2025 .
    1. Given the significant declines in your classic footwear franchises and the expectation for continued double-digit drops in NIKE Direct, how do you plan to mitigate the immediate revenue impact while rebalancing your product portfolio?

    2. With NIKE Digital traffic underperforming and sales declining 20% in Q1, what specific strategies are you implementing to revive consumer engagement and drive growth in your online channels?

    3. In Greater China, you've faced traffic deceleration and elevated inventory in a promotional market; how are you addressing these challenges to restore momentum and capitalize on long-term growth opportunities in this critical region?

    4. Your spring '25 order books came in flat and below expectations despite positive feedback on new products; what concrete actions are you taking to ensure that new innovations will translate into actual sales growth in the coming seasons?

    5. Considering the pressures from higher promotional activity, channel mix headwinds, and supply chain deleverage on gross margins, what measures are you putting in place to protect profitability while investing in brand momentum and managing inventory levels?

    Program DetailsProgram 1
    Approval DateJune 2022
    End Date/DurationFour years
    Total additional amount$18 billion
    Remaining authorization$7.8 billion
    DetailsIntended to return value to shareholders, manage capital structure, and offset dilution from stock-based compensation

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: Q2 2025
    • Guidance:
      1. Q2 Revenue: Expected to be down in the 8% to 10% range .
      2. Q2 Gross Margins: Expected to be down approximately 150 basis points .
      3. Q2 SG&A: Expected to be roughly flat versus the prior year .
      4. Other Income and Expense: Expected to be $30 million to $40 million .
      5. Effective Tax Rate: Expected to be in the high teens range .
      6. Full-Year Guidance: Withdrawn due to CEO transition .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025
    • Guidance:
      1. Revenue: Expected to be down mid-single digits for the full year .
      2. Gross Margin: Expected full-year expansion of approximately 10 to 30 basis points .
      3. SG&A: Expected to grow slightly versus the prior year .
      4. Other Income and Expense: Expected to be approximately $250 million to $300 million for the year .
      5. Effective Tax Rate: Expected to be in the high teens range .
      6. First Quarter Revenue: Expected to be down approximately 10% .
      7. First Quarter Gross Margins: Expected to be in line with the full-year guidance .
      8. First Quarter SG&A: Expected to be up mid-single digits .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2025
    • Guidance:
      1. Full Year Revenue Growth: Expected to grow approximately 1% .
      2. Q4 Revenue: Expected to be up slightly .
      3. Restructuring Charges: Approximately $450 million in the second half .
      4. Q4 Gross Margins: Expected to expand approximately 160 to 180 basis points .
      5. Full Year Gross Margins: Expected to expand approximately 120 basis points .
      6. Q4 SG&A: Expected to be down slightly versus the prior year .
      7. Full Year SG&A: Expected to grow low single digits .
      8. Effective Tax Rate: Expected to remain unchanged .
      9. Next Fiscal Year: Revenue and earnings expected to grow .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024, Q4 2024, and FY 2024
    • Guidance:
      1. Revenue:
        • Q3: Expected to be slightly negative .
        • Q4: Expected to be up low single digits .
        • Full Year: Expected to grow approximately 1% .
      2. Gross Margin:
        • Q3: Expected to expand 160 to 180 basis points .
        • Q4: Expected to expand 225 to 250 basis points .
        • Full Year: Expected to expand 140 to 160 basis points .
      3. SG&A:
        • Full Year: Expected to improve to low single digits, excluding restructuring charges .
        • Restructuring Charge: $400 million to $450 million .
      4. Other Income and Expense: Expected to be $275 million to $325 million for the full year .
      5. Effective Tax Rate: Expected to be in the high teens range .

    Competitors mentioned in the company's latest 10K filing.

    • adidas
    • Anta
    • ASICS
    • Deckers
    • Li Ning
    • lululemon athletica
    • New Balance
    • On
    • Puma
    • Under Armour
    • V.F. Corporation

    These companies are mentioned as competitors in the athletic footwear, apparel, and equipment industry, which is described as highly competitive on a worldwide basis .

    Recent developments and announcements about NKE.

    Financial Reporting

      Earnings Call

      ·
      Dec 20, 2024, 5:14 AM

      Nike recently released its fiscal 2025 second quarter earnings call transcript, highlighting several key points about its financial performance and strategic initiatives. The company reported a decline in revenues by 8% on a reported basis and 9% on a currency-neutral basis, primarily due to headwinds from franchise management actions. Nike Direct sales were down 14%, with a significant 21% decline in Nike Digital sales, while wholesale sales decreased by 4% . Gross margins fell by 100 basis points to 43.6%, attributed to higher markdowns and wholesale discounts aimed at liquidating inventory .

      Management provided forward guidance, indicating a focus on repositioning the business to drive a pull market for Nike. This includes strategic actions to reduce inventory levels and elevate the consumer experience by growing organic traffic and driving full demand . The company is also shifting its product portfolio by reducing reliance on classic footwear franchises and increasing investment in new product innovations .

      Significant comments were made regarding market conditions, with Nike experiencing challenges in retail traffic and sales, particularly in North America and Greater China. However, there was positive momentum noted during key consumer moments like Black Friday and the 11/11 shopping festival in China .

      Analysts raised questions about Nike's relationships with retail partners and the company's efforts to regain shelf space. Management emphasized their commitment to leading a consumer-led marketplace and investing in innovative products to drive mutually profitable growth with wholesale partners .

      Overall, Nike is focused on strategic initiatives to stabilize its business, reignite brand momentum, and return to a healthy marketplace, despite current financial headwinds .

      Earnings Report

      ·
      Dec 19, 2024, 9:41 PM

      NIKE, Inc. has released its fiscal 2025 second-quarter earnings results, reporting revenues of $12.4 billion, which is a decrease of 8% on a reported basis compared to the prior year and a 9% decrease on a currency-neutral basis . The gross margin decreased by 100 basis points to 43.6%, primarily due to higher discounts and changes in channel mix, although this was partially offset by lower product input costs and reduced warehousing and logistics costs .

      Net income for the quarter was $1.2 billion, a decline of 26%, and diluted earnings per share were $0.78, a decrease of 24% . NIKE Direct revenues were $5.0 billion, down 13% on a reported basis and 14% on a currency-neutral basis, largely due to a 21% decrease in NIKE Brand Digital and a 2% decrease in NIKE-owned stores . Wholesale revenues were $6.9 billion, down 3% on a reported basis and 4% on a currency-neutral basis .

      The company also highlighted its continued commitment to shareholder returns, with dividends of $557 million, up 7% from the prior year, and share repurchases of $1.1 billion, reflecting 13.1 million shares retired as part of its four-year, $18 billion program .

      Overall, NIKE's financial performance reflects challenges in the current market environment, with declines across all geographies and product categories, but the company is taking steps to reposition its business and reignite brand momentum through sport .