This summer, Nike had to admit to its biggest sales drop in four years. In fact, the trainer brand withdrew its forecasts for the rest of the year. All eyes are now on new CEO Elliott Hill.
New rivals
In the summer quarter (June to August), Nike sales fell 10 % to 11.59 billion dollars (10.5 billion euros) – the biggest sales slump since the start of the Covid pandemic. Gross margin rose slightly from 44.2 % to 45.4 %, but earnings per share dropped more than a quarter to 0.70 dollars.
The biggest drop (- 13 %) came at Nike Direct, the brand’s Direct-to-Consumer branch, while wholesale revenue was also down 8 %. China continued to perform weakly as well. Nike faces strong competition from new rivals such as Deckers’ Hoka and On, backed by Roger Federer.
Strengthening relationships
Under the leadership of previous CEO John Donahoe, Nike focused on direct sales to consumers through its own shops and websites. However, this strategy led to reduced partnerships with retail partners, allowing players like Foot Locker and Dick’s Sporting Goods to push alternative brands forward and make them big.
His successor Hill, who previously spent 32 years at Nike, therefore faces the tough job of reviving the footwear giant. It will be his job to rebuild relationships with both retail partners and consumers, with innovation and new product launches.
In anticipation, Hill gets a reprieve: Nike is cancelling its upcoming investor day and shelving full-year forecasts. Analysts predict a further sales decline of 8 to 10 % in the current quarter, while the year-end season may also be one with lots of discounting and less traffic on its digital platforms. “A comeback on this scale takes time, but we are seeing early progress”, chief financial officer Matthew Friend maintains.
