Faced with the challenge of “navigating macro headwinds that will have a pronounced impact on fiscal 2025” and continued softness in China, Nike (NYSE:NKE) now expects FY25 sales for the sportswear giant to be down mid-single-digits with sales in the first half of the year down by high-single-digits. The company initially guided for a low-single-digit decline in sales for 2025. Gross margin in FY25 is expected to expand by 10-30 basis points.
For Q1, the company is expecting revenue to drop 10% with gross margin in line with its full-year guidance.
“A comeback takes time,” CFO Matthew Friend said on the company’s earnings call with analysts, and the increased macro uncertainty in China will remain headwinds on revenue.
In the wake of Friend’s guidance, Nike (NKE) shares extended after-hours losses and were down nearly 11% before bottoming out.
Both CEO John Donahoe and Friend acknowledged the lack of innovation which has plagued the company, especially in the most recent fiscal year, as competitors gain traction in both the fitness and running categories. While there will be fewer launches in Q1, Donahoe said the “breath of innovation is accelerating” with a goal of doubling its innovation pipeline by the end of 2025.
One of the areas that the company pledged to reinvigorate is its once legendary running division, currently eclipsed by competitors who have seized on Nike’s (NKE) anemic product launches. The company will initiate a “comprehensive running campaign” to highlight the Pegasus 41, Nike’s newest running shoe entry with ambitions to boost sales in the company’s lifestyle category as well.
“Nike is focused on taking back market share,” Friend said, “but this will take some time.”
Despite the cautiously optimistic tone and assurances of regaining dominance in the athletic industry, the stock continued to lose altitude on the heels of the company’s FQ4 results in which a beat in earnings was overshadowed by softer-than-expected sales. In after-hours trading, NKE retreated to a low of $82.80 which translates into a 4-year low during regular trading.