Sports footwear and apparel giant Nike's new financial quarter performance exceeded market expectations, and the Greater China market maintained six consecutive quarters of growth.
On March 21, Eastern Time, Nike Inc. (NYSE: NKE) disclosed its financial performance for the third quarter of the 2024 fiscal year as of February 29, 2024. In the third quarter, it achieved a revenue of $12.429 billion, exceeding market expectations and remaining unchanged year-on-year. Realized a net profit of 1.172 billion US dollars, exceeding market expectations and a year-on-year decrease of 5%. Diluted earnings per share were $0.77, exceeding market expectations and a year-on-year decrease of 3%.
In the first three quarters of fiscal year 2024, Nike achieved a revenue of $38.756 billion, a year-on-year increase of 1%; Realized a net profit of 4.2 billion US dollars, a year-on-year increase of 4%.
Main financial data
The financial report shows that Nike Group's gross profit margin increased by 1.5 percentage points in the third quarter, reaching 44.8%, mainly driven by strategic pricing measures and a decrease in shipping and logistics costs, but partially offset by higher product input costs and restructuring expenses. Inventory was $7.7 billion, a year-on-year decrease of 13%, reflecting a decrease in unit quantity.
Nike Group President and CEO John Donahoe said, "We are making necessary adjustments to drive Nike's next phase of growth. We have made progress and are building a long-term new innovation cycle, telling more impactful brand stories, and working with our distributor partners to expand the entire market."
Specifically, by brand classification, Nike's revenue in the third quarter was $11.9 billion, a year-on-year increase of 2%, mainly due to growth in North America, Greater China, Asia Pacific, and Latin America being offset by declines in Europe, the Middle East, and Africa; Nike's brand's EBIT was $2.128 billion, a year-on-year increase of 6%. The Converse brand's revenue was $495 million, a year-on-year decrease of 19%. Excluding exchange rate factors, the year-on-year decrease was 20%, mainly due to the decline in business in North America and Europe; Converse EBIT was $98 million, a year-on-year decrease of 40%.
By channel, Nike's self operated business revenue in the third quarter was 5.4 billion US dollars; Nike's digital business revenue decreased by 3% year-on-year, and decreased by 4% on the basis of unchanged exchange rates; Wholesale revenue was 6.6 billion US dollars, a year-on-year increase of 3% on the basis of unchanged reports and exchange rates.
By category, in the third quarter of the fiscal year, Nike brands had the highest proportion of shoe revenue, accounting for nearly 70%, reaching $8.162 billion, a year-on-year increase of 2%, and a year-on-year increase of 3% on the basis of unchanged exchange rates. Clothing revenue was 3.29 billion US dollars, a decrease of 3%. The equipment revenue was 487 million US dollars, a year-on-year increase of 21%, and an increase of 20% on the basis of unchanged exchange rates.
Revenue data by category
From a regional perspective, both the North American market and Greater China region have performed excellently. Among them, the domestic sports consumption market in China continues to heat up, with Nike Greater China achieving a revenue of 2.084 billion US dollars in the third quarter, a year-on-year increase of 5%, and a year-on-year increase of 6% on the basis of unchanged exchange rates, maintaining continuous growth for six quarters.
Specifically, in the Greater China region, with the exchange rate unchanged, footwear increased by 5% year-on-year, clothing increased by 10% year-on-year, and equipment increased by 9% year-on-year. The EBIT in Greater China was 722 million US dollars, a year-on-year increase of 3%. In addition, Greater China was the only region to achieve positive profit growth in the third quarter, except for the North American market.
Revenue data by market
EBIT data
In this quarter, Nike accelerated its expansion of its social e-commerce layout. Nike China stated that in the future, Nike will continue to innovate its operating ecosystem through multiple online channels, promoting the scale growth and development space of its business in China.
Previously, Nike stated in its second quarter financial report that the group is seeking opportunities to save a total of $2 billion in costs over the next three years, including simplifying product classification. Due to warnings of weak demand in the coming quarters, the company has also lowered its sales guidelines.
Nike has also reiterated its previous forecast for the 2024 fiscal year, with an expected annual revenue growth of approximately 1%. Nike executives also released guidance for the fiscal year 2025 during the earnings conference call, predicting a year-on-year increase in revenue and profits for the fiscal year, but did not disclose the extent of the growth. Among them, Nike's CFO Matthew Friend stated that due to the weak global macro outlook, Nike is cautiously planning to lower its revenue in the first half of the 2025 fiscal year to low single digits.
During the conference call after the financial report, company executives also admitted that Nike had lost market share in the running shoe market. Matthew Friend told investors that the company is reducing the supply of classic shoes such as the Air Force 1 and Pegasus running shoes, and will focus on developing upcoming new shoe models.
According to foreign media reports, this is a significant change for Nike compared to five years ago, when basketball shoes from the Jordan (AJ) brand, Air Force 1, and Nike Dunk court style basketball shoes drove sales of Nike sports shoes. However, in recent times, consumers have gained new favor in the market.
Nike is still considered a market leader in sports shoes and clothing, but this category has become more crowded. According to analysts cited by foreign sources, Nike's product line has lost focus and fallen behind in innovation, giving up some market share to new entrants such as Hoka and On Running, as well as traditional brands such as Brooks Running and New Balance.
According to data reported by foreign media, in February this year, Dick's Sporting's footwear market share increased from 6.1% in October 2023 to 8.2%, and New Balance's market share increased from 4.6% to 5.4%. This is in stark contrast to Nike's Jordan, with the Nike Jordan brand's market share hovering only above 5% from October to February, according to YipitData data.
As of the close of the US stock market on March 21st, Nike rose 0.55%. After the financial report was released, Nike's stock price rose by about 5% after hours, but after the release of the 2025 fiscal year guidelines, the stock price fell by more than 7% at one point and ultimately fell by 5.39% after hours.