Nike expected to post sales decline as it navigates tariffs, turnaround strategy
Nike (NKE) is expected to report results for its fiscal first quarter on Tuesday after the market close as the sneaker giant navigates a major turnaround strategy under CEO Elliott Hill, who took the helm last fall, and President Trump’s tariffs.
Wall Street analysts expect adjusted earnings per share to come in at $0.28, a decline of 60% from the prior-year period, according to data from Bloomberg. Revenue is expected to drop 4.9% to $11.02 billion.
In a call with investors in the previous quarter, CFO Matthew Friend said revenue would be down mid-single digits in the first quarter.
Revenue for its direct-to-consumer business, Nike Direct, is expected to decline 8.3% from a year ago to $4.3 billion. Wholesale revenue is also forecasted to drop roughly 8% as well to $6.28 billion. These would mark improvements from the 14% and 9% declines reported in the prior quarter.
Its namesake Nike brand is expected to see sales drop 5% from a year ago to $10.55 billion, while Converse’s revenue is forecasted to decline the most, roughly 9%, to $456.1 million.
Nike stock is down about 8% so far this year.
“Nike is making the right moves by cleaning up inventory, increasing newness, and strengthening relationships with wholesale partners,” Telsey Advisory Group analyst Cristina Fernández said in a note to clients. “However, the brand still seems a few quarters away from reaching stabilization.”
She pointed to “several profit headwinds” like new products; a return to wholesale partners like Dick’s Sporting Goods (DKS) and JD.com (JD), among others; and the impact of tariffs.
“We will continue navigating through several factors that create uncertainty in this operating environment, including for the consumer, and so our outlook reflects our best assessment of these factors based on the data we have available today,” Friend said earlier this year.
Nike also projected gross margins to fall between 350 and 425 basis points in the current quarter, including an approximately 100 basis points of negative impact from tariffs alone. Wall Street expects gross margin to come in at 41.7% for the quarter, an improvement from the 40.3% reported in the prior quarter.
“We estimate a gross incremental cost increase to NIKE of approximately $1 billion,” Friend said, adding it would cut its reliance on China for manufacturing the goods it sells in the US as part of this strategy.
Chinese suppliers currently account for about 16% of the shoes the company imports into the US. It plans to bring that down to the “high-single-digit range” by the end of this fiscal year.
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