The Nike logo is displayed at a Nike Well Collective store on February 16, 2024 in Glendale, California.
Mario Tama | fake images
Nike on Thursday reported holiday sales that beat estimates, helped by better-than-expected growth in North America.
Here's how the company performed compared to what Wall Street anticipated, according to a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: 77 cents vs. 74 cents expected
- Revenue: $12.43 billion vs. $12.28 billion expected
The company's reported net income for the three months ended Feb. 29 was $1.17 billion, or 77 cents per share, compared with $1.24 billion, or 79 cents per share, a year earlier. Excluding 21 cents per share related to restructuring charges, earnings per share would have been 98 cents, the company said.
Sales rose to $12.43 billion, up slightly from $12.39 billion a year earlier.
In North America, where demand has been unstable, sales rose about 3% to $5.07 billion, compared with estimates of $4.75 billion, according to StreetAccount.
As consumers reduce spending on discretionary items like clothing and shoes, Nike has spent the last few months focused on what it can control: cutting costs and becoming more efficient so it can turn a profit and protect its margins.
In December, it announced a sweeping restructuring plan to cut costs by about $2 billion over the next three years. He also cut his sales forecasts, warning of weaker demand in coming quarters.
Two months later, it said it was cutting 2% of its workforce, or more than 1,500 jobs, so it could invest in its growth areas, such as athletics, women's and the Jordan brand.
The early stages of Nike's cost cuts, which involve streamlining its assortment, reducing management levels and increasing automation, likely helped the retailer beat profit expectations in the three months ended Nov. 30, even though it didn't. met sales estimates for the second consecutive quarter. .
The cuts, along with “strategic pricing actions and lower ocean freight rates,” also contributed to a 1.7 percentage point gain in gross margin – the first time the company saw its gross margin increase compared to with the previous year in at least six quarters.
Nike is still considered the market leader in the sneaker and apparel sector, but the category has become more crowded and the retailer has had to work harder to compete. Some analysts say Nike's lineup has lost focus and say the company has fallen behind in innovation, ceding market share to new entrants like Hoka and On Running, as well as legacy brands like Brooks Running and New Balance.
Last month, Nike released the Book 1, its latest basketball shoe featuring NBA star Devin Booker. But the release was not well received because “it looked more like a casual sneaker rather than a [a] basketball shoe,” according to a research note from Jane Hali & Associates.
The firm is now neutral on Nike long-term, compared to its previous rating of positive, because it is unclear where the brand is headed, said senior analyst Jessica Ramirez.
You've noticed that Nike has removed many products from its offering, indicating that it is preparing to introduce new styles. But it's still unclear exactly what those changes will look like.
“They have already said [those changes are] “It's going to take some time,” Ramirez told CNBC ahead of Nike's earnings release. “It's a little worrying to know that they don't have a solid plan that we know of yet.”
Read the full earnings release here.
