Nike warned on Thursday that sales would shrink by a low single-digit percentage in the first half of the 2025 fiscal year as the world’s largest sportswear maker cuts its franchises to cut costs.

Nike’s warning came after the stock market closed and shares fell 5.6% in extended trading. Executives acknowledged that Nike’s direct-to-consumer strategy was not driving growth as expected and that Nike was losing ground in the running category.

In December, Nike outlined a $2 billion savings plan that included reducing the supply of underperforming products and improving its supply chain.

Nike presented a $2 billion savings plan in December. REUTERS

In a post-results call on Thursday, Nike CFO Matthew Friend told investors that the company was cutting back on orders for “classic” shoes like the Air Force 1, as well as its current Pegasus Running shoes, as it shifts its focus to the coming years. launches and develops new products.

“It’s not just about a product or item here and there – it’s about building a robust pipeline of innovation,” CEO John Donahoe said on the call.

Nike beat Wall Street estimates for third-quarter revenue and profit thanks to holiday discounts and launches of new sneakers, including the Ultrafly trail running shoe, which it sees as a way to win back customers amid increasing competition from brands such as On and Decker’s. Hoka.

Donahoe promised investors that the company would introduce even more new running sneakers this year, including shoes for “everyday runners” that feature the retailer’s Nike Air cushioning.

The company maintained its fiscal 2024 revenue guidance of 1% growth.

“It’s not just about a product or item here and there – it’s about building a robust pipeline of innovation,” said CEO John Donahoe. Getty Images

Newer brands have taken market share away from Nike thanks to innovative performance shoes like On Running’s Cloudflow 4 and Hoka’s Clifton 9 and Bondi 8, which have thick foam soles that resonate with customers.

Nike reported a 3% increase in North America, its largest market, and a 5% increase in Greater China as heavy promotions on its Jordan shoes attracted customers during the all-important shopping season.

The company’s quarterly profit of 77 cents per share beat estimates of 74 cents, thanks to job cuts and its cost-cutting plan.

The company maintained its fiscal 2024 revenue guidance of 1% growth. Getty Images

Nike said revenue rose 0.3% to $12.43 billion, beating LSEG estimates of $12.28 billion.

“There’s nothing here to show that there’s anything out of the ordinary in the quarter… in terms of what this means for the company’s turnaround… it doesn’t mean much because the company is in a restructuring situation, but it’s actually still just getting started,” said David Swartz, analyst at Morningstar.

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