The sporting goods company Nike, which is facing a change in leadership, started its financial year with a slump in sales and profits. Sales fell by ten percent to $11.6 billion in the first quarter (at the end of August), slightly more than expected, as the world’s number one announced on Tuesday evening in Beaverton, Ohio. Net profit fell by 28% to $1.1 billion, but was significantly better than analysts had feared. Nike announced that it would also comment on the outlook in a conference call with analysts later in the evening. Industry experts expect CFO Matthew Friend to scale back expectations.
In September, Nike announced the departure of CEO John Donahoe. In mid-October, Elliott Hill, who Nike brought back from retirement, is scheduled to take over the helm. Nike postponed an investor day that had been announced for mid-November indefinitely. “The first quarter largely met our expectations,” said CFO Friend. He asked investors to be patient: “A comeback of this magnitude takes time, but we are seeing initial success.” Hill will usher in the next phase of growth for Nike.
His predecessor John Donahoe’s strategy included relying more on direct sales. The downside, however, was that the shelf space Nike was giving up in stores was filled by competitors’ products. This made the rivals more visible to consumers.
The group is primarily losing market share to new brands such as Hoka from its competitor Deckers and On, behind which the Swiss tennis professional Roger Federer stands. Nike wants to defend itself against this with new model series such as the “Air Max Dn” and the “Pegasus 41”. However, this has not yet been reflected in the business figures. Online sales in particular are sluggish: online sales, which Donahoe had relied on, shrank by 20% in the first quarter. Business via wholesalers, on the other hand, only fell by eight percent.
The hoped-for recovery is also failing to materialize in China. Sales there fell by four percent, while the competition recently recorded growth again. Many customers in China now prefer domestic brands during the economic crisis.
Nike is currently undergoing an austerity program launched by Donahoe that aims to cut costs by around $2 billion. Around two percent of jobs are affected.
Crisis can be seen in the share price
The company’s crisis can be clearly seen in its share price. From the record price of almost $180 in May 2021, it fell to $70 this summer. Recently, the price was able to recover somewhat with the prospect of a new boss. However, this recovery is in danger due to the weak summer quarter and the canceled forecast.
Nike shares fell around six percent to $83.85 in after-hours trading. The price of the paper has fallen by almost a fifth so far this year and has therefore performed significantly worse than the shares of Adidas, which have gained around a quarter since the end of 2023.
Adidas is also clearly ahead on the capital market in terms of price development over a 10-year period. Measured by market value, Nike is still well ahead of Adidas with the equivalent of around 120 billion euros. The German group has just over 40 billion euros.
