Nike’s sales declined in the second quarter of fiscal year 2025 as it searches for a successful turnaround strategy under a new CEO.
That’s a drop of 8 percent from a year earlier. The decline was extended across all sales channels, led by a 13 percent drop in the direct sales channel.
Nike’s sales growth problem dates back to early 2021, when the company prioritized direct-to-consumer distribution over a wholesale distribution model, eliminating the middlemen and the markup cutting into its bottom line.
This change initially boosted the company’s earnings-per-share and profit margins. However, it eventually hurt the brand’s momentum, as online sales do not engage consumers like in-store sales. In addition, it came when competitors such as Lululemon expanded its store count.
Still, the company’s new leadership expressed optimism that things will turn around.
“We’re taking immediate action to reposition our business, so we can get back to driving long-term shareholder value. Our team is ready to go, and I’m confident you will see more moments of NIKE being NIKE again.”
“NIKE’s second-quarter financial performance largely met our expectations, as we continue to make progress in shifting our portfolio,” added Matthew Friend, Nike executive vice president and chief financial officer. “Under Elliott’s leadership, we are accelerating our pace and reigniting brand momentum through sport.”
But investors heard that from the previous leadership more than a year ago.
That growth never came, and it may not come for quite a while, as the new business strategy that includes scaling back product discounts may backfire. Sales discounts usually hype consumers’ interest in a brand.
In addition, heavy marketing spending could take time to rebuild customer trust, further putting pressure on operating margins.
“Nike’s new strategy is bold but risky,” Georgios Koimisis, associate professor of Economics & Finance at Manhattan University, told The Epoch Times.
“Cutting back on discounts could hurt sales in the short term and may turn away price-sensitive customers. Rebuilding trust with retail partners will also take time. The plan to invest heavily in marketing and promise future innovations might not be enough to attract customers in such a competitive and dynamic environment.”
Koimisis said the critical factor for the new strategy’s success is the development and release of new, exciting products.
“If Nike doesn’t quickly release exciting new products and balance its focus between performance and lifestyle, its brand and long-term growth could be at risk,” he said. “The strategy is ambitious, but its success depends on flawless execution. If things don’t go as planned, Nike could lose more ground in the market.”
Wall Street has not been happy with the once high flyer, sending Nike’s shares slightly lower during Friday’s trading session, adding to the losses accumulated in the previous quarters. So far in 2024, Nike’s shares have lost close to 30 percent of its value compared with a 24.12 percent gain in the S&P 500; and they are down 24 percent over the last five years, compared with an 84 percent gain of the S&P 500.
Still, Paul Gabriel, founder and host at Everything Money and a Nike stockholder, thinks the company’s recent issues (factories closing, raw materials delays, and shipping delays) are temporary. “The fact is, Nike is an amazing global brand,” he told the Epoch Times. “The stock has suffered, which should be fine for valued investors.”
