Updated March 20th, 2024 at 19:36 IST

Nike to record decline in quarterly sales amid D2C pivot

Nike has directed its investments towards increasing sales through its own channels, such as stores and online platforms.

Reported by: Business Desk
Nike | Image:Unsplash
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Nike quarterly revenue: Nike is set to experience a rare decline in sales as it focuses on boosting demand in the United States and shifts towards a direct-to-consumer (DTC) strategy. The company, known for its sportswear, is anticipated to report its first quarterly revenue decrease in almost two years, drawing attention to the challenges encountered in realising the expected benefits from its direct sales approach and encountering sluggish consumer demand in North America.

In its efforts to improve profitability, Nike has directed its investments towards increasing sales through its own channels, such as stores and online platforms, rather than relying heavily on wholesalers to drive sales. 

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Despite these efforts, analysts have observed that the DTC strategy has been hindered by a lack of innovation in its footwear offerings, particularly for its iconic Air Jordan brand while facing intensified competition from emerging brands like On and Decker's Hoka, which have been gaining traction in the running shoe segment.

Analyst David Swartz remarked, "If the products fail to resonate with consumers, the distribution channel becomes irrelevant." This sentiment underscores the notion that Nike's direct sales strategy has not yielded the desired results.

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Projections indicate a nearly 1 per cent decline in Nike's third-quarter revenue, with several brokerage firms lowering their price targets in anticipation of the earnings report. Additionally, the company's per-share profit is expected to decrease by approximately 7 per cent to 74 cents, according to data from LSEG.

Nike's direct-to-consumer revenue has consistently represented around 42 per cent of its total sales in recent quarters, with wholesale channels contributing to the majority of its revenue. However, the wholesale segment, particularly in the US, has faced challenges as sportswear retailers scale back on orders due to uncertain demand trends.

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The prevailing market conditions have also affected competitors in the industry, with Adidas recently cautioning about a decline in North American sales and Foot Locker projecting lower-than-expected profits for 2024. Morningstar's Swartz emphasised the broader industry challenges, stating, "The outlook for the industry, at least for the next couple of quarters, is not very promising."

Amidst these developments, Nike's shares have experienced a decline of nearly 8 per cent year-to-date, trailing behind the broader Dow Jones index, which has shown modest gains of nearly 4 per cent.

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(With Reuters inputs)

 

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Published March 20th, 2024 at 19:36 IST