NIKE (NKE, Financial) experienced a rollercoaster following its Q3 (Feb) earnings release, initially seeing a 7% stock increase due to strong financial results. Despite reiterating a positive FY24 (May) revenue growth outlook of +1% year-over-year, the company forecasted a challenging start to FY25 with expected low single-digit sales decline in the first half. The competitive landscape is tightening, prompting NIKE to adjust its product mix towards innovation, which may impact revenue in the short term.
The company is optimistic about a turnaround in the latter half of FY25, anticipating growth in earnings, sales, and operating margins. This comes after a quarter where NIKE met its expectations, showcasing a 24% year-over-year increase in earnings to $0.98 per share on steady revenue of $12.4 billion. Notably, gross margins improved to 44.8%, driven by strategic pricing and reduced ocean freight rates.
Performance varied across regions, with North America and China seeing revenue increases of 3% and 6%, respectively. APLA also reported a 4% revenue growth, while EMEA faced a 4% decline, affected by weaker digital and wholesale channel sales. Despite these mixed results, NIKE's new product introductions have been well-received, especially in performance footwear, which saw significant growth.
NIKE's efforts to rejuvenate its brand come as it acknowledges falling behind in capturing consumer interest in new products. This strategic pivot, however, raises concerns among investors about potential market share losses to competitors like HOKA (DECK, Financial) and On (ONON, Financial), who have been capitalizing on shifting consumer preferences.
