Nike's revenue declines significantly
Struggling Shoes Giant, Nike, Takes Swift Action
The mighty Nike is facing a challenging tide.
The bosses at Nike announced a staggering 9% drop in global sales during the third quarter, with sales plummeting 17% in China alone. In North America, Nike's largest market, sales plunged 9%. Yet, investors breathed a sigh of relief as Nike's stock, symbolized by the ticker NKE, nudged up 4% in after-hours trading on Thursday. Despite this, Nike's stock has witnessed a significant 30% descent over the past year.
What's causing this downturn? Nike is grappling with a consumer slowdown and fierce competition from rising stars like Hoka and On in the running shoe market. Customers are shifting their spending habits, moving away from high-priced sneakers and athletic clothing, opting for basics instead.
Nike isn't going down without a fight. To stimulate demand, it's scaling back production on classic sneaker lines such as Air Force 1 and Pegasus. The aim is to generate interest and shift focus towards more expensive Air Max shoes and newer Pegasus products.
In the past, Nike heavily relied on traditional brick-and-mortar retailers, such as DSW. However, it drastically reduced these partnerships and shifted more of its inventory to online platforms. This abrupt move, however, resulted in a decline in sales. In response, Nike has re-established some of these partnerships.
Neil Saunders, an analyst at GlobalData Retail, believes Nike took things too far and undervalued the significance of third-party retailers.
Nike's gambling on its new CEO, Elliot Hill, a former Nike executive who returned to the company last year, and strategic collaborations with celebrity brands like Kim Kardashian's Skims, in hopes of boosting profits.
The partnership between Nike and Skims is yielding a new brand, NikeSkims, tailored for women, which is set to launch in the United States this spring.
Keep an eye on Nike as this story unfolds.
The Inside Scoop
- Smart Inventory ManagementNike is concentrating on managing its inventory effectively by transitioning towards a full-price business model. This involves trimming promotional days and discount rates, particularly in the NIKE Digital segment.
- Innovation and High-Performance ProductsNike is emphasizing innovation in running and training products, like the Pegasus Premium and Vomero 18. This focus helps boost growth in the performance segment, offsetting declines in classic footwear franchises like Air Force 1 and Air Jordan.
- Savvy Wholesale StrategyNike is reframing its wholesale strategy by boosting partnerships with retailers to encourage growth. This includes optimizing its direct-to-consumer channels and enhancing marketplace efficiency.
- Limited Availability and High DemandTo generate excitement, Nike is limiting the availability of its sneakers, a strategy that stirs both curiosity and frustration among buyers. This approach is intended to rekindle demand and inject hype into new releases.
Despite these efforts, Nike has reported a 9% decline in revenues for Q3 2025, with challenges in Greater China contributing significantly to this decrease. The company anticipates a mid-teens sales drop in the fourth quarter.
Nike continues to focus on shareholder returns, including a 6% rise in dividend payouts and $499 million in share repurchases during Q3. However, stock performance hinges on broader market conditions and investor expectations surrounding Nike's turnaround strategies.
- Despite facing a 9% decline in revenues for Q3 2025, Nike is shifting towards a full-price business model to manage inventory more effectively, cutting back on promotional days and discount rates, particularly in the NIKE Digital segment.
- In an attempt to offset declines in classic footwear franchises like Air Force 1 and Air Jordan, Nike is emphasizing innovation in running and training products, such as the Pegasus Premium and Vomero 18, to boost growth in the performance segment.
- Nike is also reframing its wholesale strategy by boosting partnerships with retailers to encourage growth. This includes optimizing its direct-to-consumer channels and enhancing marketplace efficiency.
