Categories Analysis, Consumer

Nike (NKE): A closer look at the sportswear giant’s performance in Q2 2024

Full-year 2024 gross margins are projected to expand by 140-160 basis points

Shares of NIKE, Inc. (NYSE: NKE) plummeted 11% on Friday after the company delivered mixed results for the second quarter of 2024 and cut its sales outlook for the year. The company also laid out a cost savings plan for the next three years. Here’s a look at the sneaker giant’s performance in Q2:

Mixed results

Nike’s revenues inched up 1% to $13.4 billion in Q2 2024 compared to the same period last year, but fell short of estimates. Net income grew 19% year-over-year to $1.6 billion. EPS rose 21% to $1.03, beating analysts’ projections.

Business performance and cost savings plan

As stated on the quarterly conference call, while Nike’s efforts to liquidate excess inventory and reduce wholesale selling dampened its reported revenue growth through the second quarter, its total retail sales saw growth. Average selling prices were up across both footwear and apparel while average unit retail grew across channels. The company’s higher-priced products remained resilient and it maintained lower markdown rates than many of its rivals.

In Q2, Nike saw revenue growth across all its regions, barring North America. On a reported basis, revenue decreased 4% YoY in North America while the Europe, Middle East & Africa (EMEA) and Greater China regions saw revenue growth of 2% and 4% respectively. The Asia Pacific & Latin America region saw the highest growth at 13% during the quarter.

Nike also said it is looking for opportunities to generate up to $2 billion in cumulative cost savings over the next three years through measures such as simplifying its product assortment, increasing automation and use of technology, streamlining the organization, and leveraging its scale to drive greater efficiency.

Outlook

Nike expects reported revenue for the third quarter of 2024 to be slightly negative as it compares to double-digit growth in the prior-year quarter. For the fourth quarter of 2024, reported revenue is expected to be up low single digits. The company revised its outlook for the full year of 2024 and now expects reported revenue to grow approx. 1% versus the prior expectation for mid-single-digit growth.

On its call, the company stated that “this new outlook reflects increased macro headwinds, particularly in Greater China and EMEA. Adjusted digital growth plans are based on recent digital traffic softness and higher marketplace promotions, life cycle management of key product franchises and a stronger US dollar that has negatively impacted second-half reported revenue versus 90 days ago.”

On the other hand, Nike expects its gross margins to expand in the second half of the year, benefiting from strategic price increases, improved ocean freight rates, and supply chain efficiency. Margins are expected to expand by 160-180 basis points in Q3 2024 and by 225-250 basis points in Q4 2024. Full-year gross margins are projected to expand by 140-160 basis points. These benefits to margins are expected to be partly offset by higher product input costs and impacts from foreign exchange headwinds.

Listen to the conference calls as they happen. Don't miss a beat! With AlphaStreet Intelligence, you can listen to live calls and interviews as they happen, so you never have to worry about missing out on important information.

Most Popular

Home Depot (HD) Q4 2023 Earnings: Key financials and quarterly highlights

Home Depot (NYSE: HD) reported fourth quarter 2023 earnings results today. Sales were $34.8 billion, down 2.9% from the same quarter a year ago. Comparable sales decreased 3.5%.  Net earnings were $2.8

Nvidia (NVDA) is set to report Q4 2024 results. Here is what to expect

Nvidia Corporation (NASDAQ: NVDA) has emerged as the frontrunner in providing cutting-edge solutions to enterprises for ramping up their generative AI deployments. The chipmaker is thriving on the rapid transition

Hasbro vs. Mattel: Here’s how these toymakers fared in Q4 2023

Leading toymakers Hasbro, Inc. (NASDAQ: HAS) and Mattel, Inc. (NASDAQ: MAT) reported their fourth quarter 2023 earnings results this month. Both companies performed differently, with Hasbro coming out of a

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top