Nike to post biggest drop in sales since COVID, analysts expect target reset

By Ananya Mariam Rajesh and Nicholas P. Brown

(Reuters) – Investors and analysts expect Nike to lower annual forecasts on Tuesday when it reports quarterly results, the company’s first earnings report since announcing a new CEO earlier this month.

Elliott Hill, who spent 32 years at the sportswear giant before retiring in 2020, will return as top boss effective Oct. 14 to succeed John Donahoe, Nike announced Sept. 19.

Hill faces the daunting task of turning around a once-dominant brand that is now losing market share and has been challenged of late by smaller, nimbler competitors such as Deckers’ Hoka and Roger Federer-backed On.

“This is going to be one of those quarters where they’re probably going to try to shrug off all the bad news as much as they can right now and wrap it up and start over,” said Jay Woods, global chief investment banking strategist. the firm Freedom Capital Markets.

Woods said he expected investors to give Hill a “grace period” as he comes on board, but added: “The question is, maybe he, with his experience and deep connections seeded in the iconic Nike brand …bring some magic back?”

Four brokerages cut their price targets on Nike stock during the quarter, but after the company announced Hill’s new role, five brokerages raised their price targets.

Nike’s first-quarter revenue is expected to fall 10 percent to $11.65 billion, the biggest decline in four years, and a 44.7 percent drop in earnings per share to 52 cents, according to analysts’ estimates. compiled by LSEG.

In June, Nike forecast a surprise drop in annual sales, and some analysts expect to revise those targets further on Tuesday.

Analysts have revised their expectations since then and on average expect the company to report a 5% decline in annual revenue for fiscal 2025.

“Given the problems they’ve had, I think it makes sense to reset the expectations lower or remove the guidance for now and give the future team a chance to review the business, see what they think they can solve and for how long.” I’ll take it,” said Truist Securities analyst Joseph Civello.

Nike shares have risen more than 10 percent since Hill was named CEO, recovering some losses after the stock had its worst day ever in June.

Investors will also be on the lookout for any boost from the Paris Olympics. Nike and Puma were able to increase visits to their direct-to-consumer sites in their opening week and turn them into a good percentage of sales, research firm Similarweb said in August.

THE DIVA OF INNOVATION

Nike has had to push forward a few releases after losing ground to Hoka and On, whose lines of trendy and more comfortable shoes resonate with consumers.

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“If you look at any retail brand, especially in shoes, it seems like the new entrants are getting all the glamor here right now,” said Dave Wagner, head of equities at Aptus Capital Advisors, which owns a stake in Nike.

“Nike has had to innovate more, but they’re right behind the train right now.”

Over the past two quarters, Nike has unveiled new performance and running shoes such as the Air Max Dn and Pegasus 41, and announced plans to launch a new line of $100-and-under sneakers to appeal to consumers looking for costs. But the moves have yet to yield big results.

Meanwhile, the company has also re-released certain shoes with only minor tweaks, such as the color. That’s not good enough, said Jessica Ramirez, senior analyst at Jane Hali & Associates.

“I don’t think the second half will be good for Nike … until we see new products in the 2025 product line,” Ramirez said.

(Reporting by Ananya Mariam Rajesh in Bengaluru and Nicholas P. Brown in New York; Editing by Sriraj Kalluvila)