sales in China continued to say no in the vacation quarter, however the retailer beat earnings and profit estimates, helped by better-than-expected growth in North America and price changes.
Here are the corporate’s third-quarter fiscal 2024 results in comparison with Wall Street expectations, based on a survey of analysts by LSEG, formerly often called Refinitiv:
- Earnings per share: 77 cents vs. 74 cents expected
- Revenue: $12.43 billion vs. $12.28 billion expected
The company’s net income for the three months ended Feb. 29 was $1.17 billion, or 77 cents per share, compared with $1.24 billion, or 79 cents per share, a yr earlier. After excluding 21 cents per share related to restructuring charges, earnings per share could be 98 cents, the corporate said.
Sales rose to $12.43 billion, up barely from $12.39 billion a yr earlier.
In North America, where demand has been volatile, sales rose about 3% to $5.07 billion, compared with estimates of $4.75 billion, in line with StreetAccount.
Meanwhile, sales in other Nike regions were lower than estimates. In China, sales reached $2.08 billion, barely below the $2.09 billion expected by analysts. Revenue within the region increased 5%, but growth within the region declined as demand normalized following Covid-19 lockdowns.
Revenue in Europe, the Middle East and Africa fell 3% to $3.14 billion, lower than analysts’ expectations of $3.17 billion, in line with StreetAccount. In China, sales rose 5% to $2.08 billion, barely below the $2.09 billion expected by analysts. Sales in Asia-Pacific and Latin America rose 3% to $1.65 billion, below analysts’ expectations of $1.69 billion, in line with StreetAccount.
Nike shares rose about 5% after the report was released, but later fell as much as 7% after the discharge of guidance for the present quarter and financial 2025.
Excluding restructuring charges, the corporate maintained its fiscal 2024 sales outlook and said it expects revenue to grow 1%, according to expectations for 1.1% growth, in line with LSEG. According to LSEG, it expects revenue to grow barely in the present quarter in comparison with estimates by 2%.
Nike expects gross margins to expand 1.6 to 1.8 percentage points, helped by “strategic price increases, lower ocean freight rates, lower production costs and improved supply chain efficiencies,” Chief Financial Officer Matthew Friend told analysts.
These improvements are offset by higher markdowns and lower advantages from Nike’s channel offerings, in addition to foreign exchange headwinds, Friend said. These assortment changes are related to changes within the frequency with which consumers shop online in comparison with the frequency with which they shop in-store or from Nike’s wholesale partners.
For the total yr, it expects gross margins to expand by about 1.2 percentage points, down from the 1.4-1.6 percentage point increase analysts expected, in line with StreetAccount.
Nike expects fiscal 2025 revenue and profits to extend from the previous yr, but it surely didn’t say by how much. Analysts expected revenue growth of 5.6%, in line with LSEG.
The friend said Nike is “prudently planning” for revenue to say no to single digits in the primary half of fiscal 2025, reflecting a “muted macro outlook globally.”
As consumers pull back on spending on discretionary items like clothing and shoes, Nike has spent the past few months specializing in what it might probably control: cutting costs and increasing efficiency so it might probably generate profits and protect its margins.
In December, it announced a broad restructuring plan geared toward cutting costs by about $2 billion over the subsequent three years. It also lowered its sales forecasts, warning of weaker demand in the approaching quarters.
Two months later, it announced it was cutting 2% of its workforce, or greater than 1,500 jobs, to speculate in growth areas equivalent to running, women’s and the Jordan brand.
Nike’s initial stages of cost-cutting, which include simplifying its lineup, reducing management levels and increasing automation, likely helped the retailer beat earnings expectations within the three months ended Nov. 30, though it missed sales estimates for the second quarter in a row.
The cuts, together with “strategic pricing actions and lower ocean freight rates,” also contributed to a 1.7 percentage point increase in gross margin – the primary time in a minimum of six quarters that the corporate has seen a year-over-year increase in gross margin.
Nike’s gross margin recovery continued in the course of the quarter. The retailer’s gross margin increased 1.5 percentage points to 44.8%, driven by “strategic pricing actions and lower ocean freight and logistics costs.” According to the corporate, profits were partially offset by higher production costs and restructuring fees.
Nike continues to be considered the market leader in footwear and apparel, however the category has turn into more crowded and the retailer has needed to work harder to compete. Some analysts say the lineup has lost focus and that the corporate is lagging in innovation, ceding market share to recent entrants like Hoka and On Running in addition to legacy brands like Brooks Running and New Balance.
Last month, Nike released the Book 1, its latest basketball shoe featuring NBA star Devin Booker. But the discharge was not well received since it “looked more like a regular sneaker and not [a] basketball shoes,” according to a research note by Jane Hali & Associates.
The company is now neutral on Nike’s long-term rating, up from a previous positive rating, because it’s unclear where the brand is headed, senior analyst Jessica Ramirez said.
She noted that Nike has removed many products from its lineup, indicating that it is preparing to introduce new styles. However, it is still unclear what exactly these changes will look like.
“They already said [those changes are] it’s going to take some time,” Ramirez told CNBC before Nike’s results were released. “It’s a bit of concerning that they haven’t got a solid plan that we all know of yet.”
Read the total results announcement Here.
