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Nike to post worst revenue fall in 5 years on stagnant demand

Nike to post worst revenue fall in 5 years on stagnant demand

  • 20.03.2025 15:20
  • msn.com
  • Keywords: revenue decline, market share

Nike is projected to report its largest revenue decline in five years due to weak demand for its products, with mobile app downloads and store foot traffic both dropping significantly. The company's efforts to clear unsold inventory through discounts have hurt profit margins, as seen in its partnership with Foot Locker. New CEO Elliott Hill faces challenges in revitalizing the brand, with shares falling 19% since his appointment, while rival Adidas has seen a slight stock increase.

Meta ServicesMeta ReportsNKEsentiment_dissatisfiedADDDFsentiment_satisfiedRJF/PBsentiment_neutralMORNsentiment_neutralLULUsentiment_neutral

Estimated market influence

Nike

Nike

Negativesentiment_dissatisfied
Analyst rating: Buy

Expected to post the steepest revenue decline in nearly five years due to stagnant demand for its products. The company's shares have slid 19% since September 20, following Hill's appointment.

Foot Locker

Negativesentiment_dissatisfied
Analyst rating: N/A

Disclosed that promotional pressures would hurt its profit margins in the year ahead, indicating the impact of discounts imposed by Nike to clear out unsold inventory. Nike products make up more than 60% of Foot Locker's merchandise.

Adidas

Adidas

Positivesentiment_satisfied
Analyst rating: Buy

Its stock has slightly increased over the same period when Nike shares declined.

Sensor Tower

Neutralsentiment_neutral
Analyst rating: N/A

Reported a 35% decrease in downloads of Nike mobile apps for the quarter from a year earlier.

Raymond James

Neutralsentiment_neutral
Analyst rating: —

Compiled data showing foot traffic at Nike stores was down 11%.

Morningstar

Morningstar

Neutralsentiment_neutral
Analyst rating: Strong buy

Analyst David Swartz commented on Nike's need for a new product franchise to drive sales growth.

Freedom Capital Markets

Neutralsentiment_neutral
Analyst rating: N/A

Jay Woods, chief global strategist, expressed investor sentiment regarding Nike's turnaround efforts.

Kavar Capital Partners LLC

Neutralsentiment_neutral
Analyst rating: N/A

John Nagle, CIO, praised some of Hill's moves and the potential impact of new partnerships.

Lululemon

Lululemon

Neutralsentiment_neutral
Analyst rating: Buy

Mentioned as a competitor in the women's market alongside Vuori.

Vuori

Neutralsentiment_neutral
Analyst rating: N/A

Competitor mentioned alongside Lululemon in the women's market.

Widen + Kennedy

Neutralsentiment_neutral
Analyst rating: N/A

Ad agency that created Nike's Super Bowl commercial to reach women shoppers and regain pop culture relevance.

Skims

Neutralsentiment_neutral
Analyst rating: N/A

New partnership with Kim Kardashian-owned company for a women's line, which could be beneficial if successful.

Context

Analysis of Nike's Revenue Decline and Market Implications

Key Facts and Data Points

  • Revenue Decline: Nike is projected to report an 11.5% revenue decline to $11.01 billion in Q3, the steepest fall since the 38% drop during the pandemic in fiscal 2020.
  • Foot Traffic and App Downloads:
    • Mobile app downloads dropped by 35% year-over-year (Sensor Tower data).
    • Foot traffic at Nike stores fell by 11% (Raymond James data).
  • Inventory: Nike's inventories stood at $8 billion as of November 30.
  • Stock Performance:
    • Nike shares have declined 19% since September 20, following Elliott Hill's appointment as CEO.
    • Adidas stock has seen a slight increase over the same period.

Market Trends and Business Impact

  • Stagnant Demand: The decline reflects reduced consumer spending on non-essential items like sports apparel, indicating broader economic pressures.
  • Retailer Challenges: Foot Locker, which accounts for over 60% of Nike's merchandise, reported promotional pressures impacting profit margins.
  • CEO Transition: Elliott Hill's leadership is under scrutiny, with analysts questioning the sustainability of his turnaround efforts.

Competitive Dynamics

  • Adidas' Gains: While Nike struggles, Adidas has seen its stock rise slightly, suggesting investor sentiment shifting toward competitors.
  • Market Share Threats:
    • The planned women's line with Skims aims to compete with brands like Lululemon and Vuori in the activewear market.
    • Super Bowl ad campaign seeks to regain cultural relevance and appeal to female consumers.

Strategic Considerations

  • Product Strategy: Analysts emphasize the need for Nike to create "whole new franchises" rather than relying on individual product launches.
  • Investor Sentiment: Investors are seeking clarity on Nike's ability to rebuild retailer relationships and clear excess inventory, with patience wearing thin.

Long-Term Effects and Regulatory Impacts

  • Inventory Overhang: The $8 billion inventory level raises concerns about long-term profitability and the need for effective clearance strategies.
  • Cultural Relevance: The Super Bowl ad campaign highlights Nike's focus on regaining its pop culture influence, crucial for sustained growth.

Conclusion

Nike faces significant challenges in reviving its sales momentum, with both short-term pressures and long-term strategic questions. While initiatives like partnerships and marketing campaigns show promise, their success will depend on execution and investor patience.