NIKE’s slight revenue increase in the month ended 29 February 2024, was driven by sales growth in North America. The results beat the company’s expectations and rose by 3% to $5.07bn from $4.91bn in the same period last year.
In Europe, the Middle East and Africa revenue experienced a 3% decline to $3.14bn. In China, sales saw a 5% increase from the same period last year to $2.08bn and Asia Pacific and Latin America increased by 3% to $1.65bn from $1.60bn.
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Nike’s CEO John Donahoe asserted: “Sport is strong in China, and Nike is strong in China. Our growth in Q3 was 6%, which was in line with our plan. And we’re gaining share.”
China’s growth was in line with the brand’s plan “Sports is strong in China and Nike is strong in China.”
Donahoe also shared that Nike is “just getting onto Douyin,” China’s equivalent of TikTok, and added: “So, you’ll see us expanding our growth into social commerce, which is the growing digital channel in China.”
In its last quarter, Nike announced plans to restructure and streamline the organisation in a bid to realise $2bn worth of savings over the next three years.
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By GlobalData“We’ve made the necessary adjustments to bring the best of what’s worked in our proven formula so that we move forward,” said Donahoe. He added: “We are relentlessly focused on driving Nike’s next chapter of healthy and sustainable growth.”
Matt Friend, Nike’s chief financial officer was keen to add that during this quarter Nike began streamlining support and operating functions, reducing management layers and shifting more of its resources towards consumer-facing activities.
“Overall, our focus is on allocating our resources to drive more return while building an operating model with greater speed and better cost productivity as we grow,” Friend added.
Nike’s biggest focus this quarter was driving more product innovation that intends to “delight consumers and disrupt the industry” and leverage new technologies to improve efficiency and drive more collaboration.
Friend highlighted that in the last quarter, the company said that particularly in an “uneven macro environment, newness and innovation are what drives brand distinction.”
“Most importantly, this is just the beginning,” continued Friend. “With a growing portfolio of new concepts, platforms, and capabilities, our innovation teams are well-positioned to continue driving breakthroughs in performance and lifestyle over the coming years.”
Key results from Nike Q3:
- Revenue rose to $12.4bn, slightly up from $12.39bn last year
- Net income was $1.2bn down 5% from the previous year
- Gross margin increased 150 basis points to 44.8%
- EBIT was down 8% at $1.3bn compared to $1.4bn in the previous year.
- Wholesale revenues were $6.6bn, up 3%.
Nike shared weak sales outlook for fiscal 2024
Nike announced in its conference call that it anticipates revenue to grow by 1% in fiscal 2024.
It expects Q4 gross margins to expand 150 to 180 basis points benefiting from “strategic price increases, lower ocean freight rates, lower product input costs, and improved supply chain efficiency,” said Friend.
He added that the company’s outlook is offset by higher markdowns, reduced benefits from Nike’s channel mix and worsening foreign exchange headwinds.
Friend said Nike is “prudently planning” for revenue in the first half of fiscal 2025 to be down low single digits, reflecting “a subdued macro-outlook around the world.”
Nike’s slowdown persists as sportswear demand continues to slow
Here’s what GlobalData apparel analyst Louise Deglise Favre had to say about the retailer’s results:
“Nike’s underwhelming performance continued in its Q3 FY2023/24, with sales rising a timid 0.3%, causing its nine-month year-to-date sales to grow a meagre 0.9%, as demand for sportswear continues to slow amid macroeconomic difficulties and changing consumer habits.
“Nike’s performance has also been dragged down by Converse, which dropped 19.1% in Q3, as its outdated designs remain unable to attract consumers. Despite the continued slowdown, Nike maintains its full-year guidance of 1% growth, however, it expects H1 FY2024/25 sales to decline by low single-digits due to impacts of product lifecycles and ongoing economic difficulties.
“It remains more ambitious for H2, hoping that innovation efforts will resonate with consumers, with FY2024/25 on the whole expected to grow.
“Constant currency sales dropped 4% in EMEA, where consumers continued to experience high inflationary pressures and prioritized spending on essentials. In North America, sales returned to growth, rising 3%, which is an encouraging sign that brand momentum might be picking back up in its home market.
“Greater China and Asia Pacific & Latin America rose 6% and 4% respectively, partially offsetting EMEA’s poor performance, but experiencing a further slowdown from Q2 where sales grew 8% and 10% respectively, highlighting the global softening in sportswear demand.
“Within the Nike brand, footwear grew 2% while apparel declined 3%, highlighting the greater resilience of trainers which are now everyday staples for many. The brand indicated that its performance footwear saw double-digit growth, driven by strong performances across technical running, basketball and women’s fitness styles.
“Nike now plans to resharpen its focus on innovation, which is crucial to fending off increasing competition from market disruptors like On and Hoka, with a particular focus on its new Dynamic Air footwear technology, which will be on full display during the Paris Olympics this summer.
“The underperformance of apparel at Nike is synonymous with trends seen at Adidas and Puma, as consumers cut back on athleisure styles after years of burgeoning growth.
“However, unique collaborations like its collection with Jacquemus released in February 2024 and its luxury streetwear collection for the Jordan brand, which launched in China in March, will help to diversify its offering by adding more fashion elements into its designs.
