Nike cautions against soft demand for the second half of fiscal 2024
“Our Q2 results demonstrated how we are getting back on our front foot in our key areas of innovation and growth. This quarter showed strong execution by our team as we focus on our winning formula of innovative product, distinctive storytelling and differentiated marketplace experiences”, commented John Donahoe, President and CEO of Nike.
Second Quarter Results
In the three months ended on the 30th of November, the company’s revenue increased by 1%, or declined by 1% on a currency-neutral basis, as compared to the same period of last year, totalling 13.4 billion US dollars.
The Nike brand contributed 12.9 billion US dollars to the total revenue this quarter, up by 1% as reported and flat on a currency-neutral basis year-over-year, “as currency-neutral growth in APLA and Greater China was offset by declines in North America and EMEA”.
Meanwhile, Converse’s revenue amounted to 559 million US dollars, decreasing by 11% as reported and by 13% on a currency-neutral basis from the same period a year ago, also due to a weaker performance in North America and Europe.
In the second quarter of the current fiscal year, Nike’s gross margin improved by 170 basis points to 44.6%, on a comparable basis to the same period of the previous year, “driven by strategic pricing actions and lower ocean freight rates, partially offset by unfavourable changes in net foreign currency exchange rates and higher product input costs”.
The US sportswear company also posted 1.6 billion US dollars in net income in this second quarter, up by 19%, and diluted earnings per share of 1.03 US dollars, up by 21%, as compared to the second quarter of fiscal 2023.
“Nike’s second-quarter financial performance was a turning point in driving more profitable growth”, stated Matthew Friend, Executive Vice President & Chief Financial Officer of the company. But “As we look ahead to a softer second-half revenue outlook, we remain focused on strong gross margin execution and disciplined cost management”, he concluded.
In fact, Nike said that it was looking for ways to save 2 billion US dollars over the next three years, which could include simplifying the product assortment, increasing automation and use of technology, streamlining the organisation, and leveraging the scale to drive greater efficiency.
In particular, it added it expects pre-tax restructuring charges of approximately 400 million to 450 million US dollars, the majority of which will be recognised in the third quarter, primarily related to employee severance costs – meaning that it has begun to reduce its workforce.
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