In reporting Q3 results in line with its expectations but well below historical highs, Nike senior executives confirmed the streamlined company is ramping up “a multi-year cycle of innovation.” This will initially focus on new iterations of its Air technology, increased investments with its wholesale partners, and sharpened brand storytelling to reach and excite consumers worldwide with both product freshness and innovation.
Nike, whose net income fell by 5 percent to $1,172 million in the period ended Feb. 29 on flat total revenues of $12,429 million, said it does not like how the brand is showing up in retail stores and “it’s important to elevate our brand in that environment.”
| Nike - Income | |||
|---|---|---|---|
| 2024 | 2023 | Change | |
| Q3 ($ millions) | |||
| Revenues | 12,429 | 12,390 | 0.3% |
| Cost of sales | 6,867 | 7,019 | -2.2% |
| Gross profit | 5,562 | 5,371 | 3.6% |
| Demand-creation expense | 1,011 | 923 | 9.5% |
| Operating-overhead expense | 3,215 | 3,036 | 5.9% |
| SG&A expense | 4,226 | 3,959 | 6.7% |
| Interest expense | -52 | -7 | -642.9% |
| Other expense, net | -16 | -58 | 72.4% |
| Pre-tax | 1,404 | 1,477 | -4.9% |
| Tax | 232 | 237 | -2.1% |
| Net income | 1,172 | 1,240 | -5.5% |
| Diluted EPS | 0.77 | 0.79 | -2.5% |
| Nine months ($ millions) | |||
| Revenues | 38,756 | 38,392 | 0.9% |
| Cost of sales | 21,503 | 21,695 | -0.9% |
| Gross profit | 17,253 | 16,697 | 3.3% |
| Demand-creation expense | 3,194 | 2,968 | 7.6% |
| Operating-overhead expense | 9,294 | 9,035 | 2.9% |
| SG&A expense | 12,488 | 12,003 | 4.0% |
| Interest expense | -108 | 22 | – |
| Other expense, net | -101 | -283 | 64.3% |
| Pre-tax | 4,974 | 4,955 | 0.4% |
| Tax | 774 | 916 | -15.5% |
| Net income | 4,200 | 4,039 | 4.0% |
| Diluted EPS | 2.74 | 2.57 | 6.6% |
| Source: Nike Inc. | |||
The company did improve its year-over-year gross margins by 150 basis points to 44.8 percent in Q3 and increase sales in its home North American market by 3 percent to $5.07 billion. But it also realized lower sales in the EMEA (-3% to $3.14 billion). Greater China sales rose by 5 percent to $2.08 billion and APLA revenues increased by 3 percent to $1.65 billion. Converse sales contracted by 19 percent to $495 million. North American Ebit increased by 18 percent to $1.4 billion as year-over-year inventories fell by double digits and sales rose by 5 percent in the wholesale channel, increased by 3 percent in stores and by 1 percent in the digital channel. In Europe, meanwhile, reported Ebit declined by 6 percent to $734 million against a difficult comparison as direct sales fell by 4 percent, by 10 percent in the digital channel, and by 5 percent in the wholesale segment. Ebit in Greater China, where a Jordan World of Flight store is opening in Beijing this week, Q3 reported Ebit was 3 percent higher to $722 million on the 6 percent sales growth as revenues increased by 12 percent at wholesale but declined by 13 percent in the digital channel.
| Nike - Revenues | ||||
|---|---|---|---|---|
| 2024 | 2023 | Change | ||
| Q3 ($ millions) | ||||
| North America | ||||
| Footwear | 3,460 | 3,322 | 4.2% | |
| Apparel | 1,408 | 1,419 | -0.8% | |
| Equipment | 202 | 172 | 17.4% | |
| Total | 5,070 | 4,913 | 3.2% | |
| EMEA | ||||
| Footwear | 1,960 | 2,011 | -2.5% | |
| Apparel | 994 | 1,094 | -9.1% | |
| Equipment | 184 | 141 | 30.5% | |
| Total | 3,138 | 3,246 | -3.3% | |
| Greater China | ||||
| Footwear | 1,547 | 1,496 | 3.4% | |
| Apparel | 498 | 461 | 8.0% | |
| Equipment | 39 | 37 | 5.4% | |
| Total | 2,084 | 1,994 | 4.5% | |
| Asia-Pacific & Latin America | ||||
| Footwear | 1,195 | 1,141 | 4.7% | |
| Apparel | 390 | 407 | -4.2% | |
| Equipment | 62 | 53 | 17.0% | |
| Total | 1,647 | 1,601 | 2.9% | |
| Global Brand Divisions | 9 | 12 | -25.0% | |
| Total Nike Brand | 11,948 | 11,766 | 1.5% | |
| Converse | 495 | 612 | -19.1% | |
| Corporate | -14 | 12 | – | |
| Total Nike Inc. | 12,429 | 12,390 | 0.3% | |
| Total Nike Brand | ||||
| Footwear | 8,162 | 7,970 | 2.4% | |
| Apparel | 3,290 | 3,381 | -2.7% | |
| Equipment | 487 | 403 | 20.8% | |
| Global Brand Divisions | 9 | 12 | -25.0% | |
| Total | 11,948 | 11,766 | 1.5% | |
| Nine months ($ millions) | ||||
| North America | ||||
| Footwear | 10,950 | 11,090 | -1.3% | |
| Apparel | 4,555 | 4,598 | -0.9% | |
| Equipment | 613 | 565 | 8.5% | |
| Total | 16,118 | 16,253 | -0.8% | |
| EMEA | ||||
| Footwear | 6,406 | 6,086 | 5.3% | |
| Apparel | 3,331 | 3,528 | -5.6% | |
| Equipment | 578 | 454 | 27.3% | |
| Total | 10,315 | 10,068 | 2.5% | |
| Greater China | ||||
| Footwear | 4,195 | 4,099 | 2.3% | |
| Apparel | 1,368 | 1,228 | 11.4% | |
| Equipment | 119 | 111 | 7.2% | |
| Total | 5,682 | 5,438 | 4.5% | |
| Asia-Pacific & Latin America | ||||
| Footwear | 3,639 | 3,313 | 9.8% | |
| Apparel | 1,198 | 1,255 | -4.5% | |
| Equipment | 187 | 167 | 12.0% | |
| Total | 5,024 | 4,735 | 6.1% | |
| Global Brand Divisions | 34 | 44 | -22.7% | |
| Total Nike Brand | 37,173 | 36,538 | 1.7% | |
| Converse | 1,602 | 1,841 | -13.0% | |
| Corporate | -19 | 13 | – | |
| Total Nike Inc. | 38,576 | 38,392 | 0.5% | |
| Total Nike Brand | ||||
| Footwear | 25,190 | 24,588 | 2.4% | |
| Apparel | 10,452 | 10,609 | -1.5% | |
| Equipment | 1,497 | 1,297 | 15.4% | |
| Global Brand Divisions | 34 | 44 | -22.7% | |
| Total | 37,173 | 36,538 | 1.7% | |
| Source: Nike Inc. | ||||
The start of a Nike metamorphosis, which will be marked by a period of transition for its product portfolio in coming quarters, will commence next week during the 10th annual Air Max Day when the brand will introduce its new Air Max Dn style in 4,000 doors. Subsequently, the company will roll out an “Air for Athletes” advertising campaign ahead of the Paris Games, where it’s likely that a multitude of new Nike products and innovations will be introduced on the world’s best athletes.
The current FY, which ends in May, is expected to have 1 percent overall sales growth, with Q4 sales up slightly. H2 will include $450 million in restructuring charges, including $403 million in Q3. Final period gross margin is forecast to increase by 120 basis points, including a 60-basis point headwind from currency fluctuations. The preliminary FY25 outlook calls for unspecified revenue and operating income growth, but an expected low-single-digit drop in H1 revenues as the brand’s product portfolio is shifted to “newness and innovation.”
Nike to replace Adidas as DFB’s sponsor
Elsewhere, Nike announced that it will take over sponsorship of the German Football Federation (DFB) in 2027 and that it’s making steady progress in the running segment, particularly in North America, that should be accelerated after the Olympics this summer and helped by ongoing investments. For example, the number of Ekin representatives for the run specialty market has been doubled. Also, the order book for the Pegasus 41, Pegasus Premium and Pegasus Trail was described as “looking good,” and more $100+ styles have been booked for fall delivery.
