Nike has retracted its full-year performance guidance after reporting lower-than-expected revenue, highlighting the challenges incoming CEO Elliott Hill will face upon taking office later this month. Chief Financial Officer Matt Friend attributed this move to the upcoming leadership transition. The company anticipates a second-quarter revenue decline of 8% to 10%, similar to the drop in the first quarter.
Although some initial progress has been made, the situation remains challenging. Nike's stock fell 6.3% in after-hours trading, continuing its previous decline. The stock has dropped 18% year-to-date, while the S&P 500 index has risen 20% during the same period.
Prior to Hill's takeover, the world's largest footwear company is resetting expectations. Nike is currently experiencing one of its toughest periods in decades, and investors are eager to hear Hill's turnaround strategy. However, they'll have to wait longer, as the company has postponed the investor day scheduled for November to give Hill time to formulate his strategy.
First-quarter revenue fell 10% to $11.59 billion, slightly below analyst expectations. The decline was particularly severe in North America and regions including Europe, Africa, and the Middle East, with ongoing issues affecting the Converse brand. Nonetheless, there were some bright spots: revenue in Greater China exceeded expectations with a 4% decline, the smallest among all regions. Gross margin also surpassed expectations, benefiting from reduced product, warehousing, and logistics costs. Price adjustments made last year also contributed to improved profitability. Earnings per share for the first quarter, ending August 31, exceeded expectations.
Despite these figures, investors seem unimpressed, as this quarter’s performance feels like a write-off while awaiting the new CEO's strategic plan.
