Nike CEO Elliott Hill outlined his strategic plan on Thursday to revive the company’s growth trajectory, attributing recent revenue and profit declines to excessive promotional discounts. Hill, a longtime Nike veteran who rejoined the company in October, emphasized restoring “sport” as the cornerstone of the brand’s identity and operations. Hill’s comments follow the release of Nike’s fiscal second-quarter results, which showed a year-over-year decline in both revenue and profit despite surpassing Wall Street expectations.
The company reported earnings per share of $0.78, exceeding the $0.63 expected, and revenue of $12.35 billion, slightly ahead of the $12.13 billion forecasted by analysts. However, net income dropped to $1.16 billion from $1.58 billion a year earlier, while sales declined 8%, from $13.39 billion to $12.35 billion. The CEO highlighted a need to address inventory challenges and scale back aggressive discounting, which he said has undermined Nike’s brand image and profitability.
Hill noted that promotional sales accounted for about 50% of digital revenues earlier this year, a strategy he intends to pivot away from in favor of a return to full-price models. Before implementing this shift, Nike will liquidate older inventory through less profitable channels, which is expected to further weigh on gross margins in the short term. Gross margins for the holiday quarter are projected to fall by 3 to 3.5 percentage points, and sales are anticipated to decrease by low double digits, worse than analyst predictions.
Nike shares, which initially rose after the earnings report, retraced gains as Hill detailed his recovery plan. Hill criticized previous strategies under former CEO John Donahoe, including a heavy focus on digital sales and diminished partnerships with key wholesale distributors. He signaled a renewed commitment to rebuilding trust with these partners, such as Foot Locker, JD Sports, and Dick’s Sporting Goods, which have seen declining demand for Nike products.
Acknowledging past missteps, Hill said the company had lost its focus on athletic performance and over-relied on lifestyle offerings like the Air Force 1, Dunks, and Air Jordan 1 franchises. Overproduction of these styles eroded their exclusivity, contributing to market fatigue. Moving forward, Nike will focus on recalibrating supply to restore demand and exclusivity.
Regional sales performance further reflected challenges. North American sales fell 8% to $5.18 billion, while European, Middle Eastern, and African revenues dropped 7% to $3.30 billion. In China, sales declined 8% to $1.71 billion, missing expectations. Asia-Pacific and Latin American revenues decreased 3% to $1.74 billion. Converse, Nike’s subsidiary, also underperformed with a 17% revenue decline to $429 million, significantly below projections.
Despite setbacks, Nike achieved a notable win when the National Football League (NFL) extended its contract with the company through 2038. As the exclusive uniform provider for the NFL, Major League Baseball (MLB), and the National Basketball Association (NBA), Nike retains a dominant position in sports apparel. Hill’s leadership marks a critical juncture for Nike as it seeks to rebuild its reputation, market share, and financial performance while refocusing on its core identity as a leader in athletic innovation and performance. – By MENA Newswire News Desk.
