JUST BLEW IT?
A lack of innovation and catchy styles for Nike sneakers is being blamed for slumping sales in North America,
NEW YORK— Nike Inc. shares were in decline Wednesday after the company squelched any hope of a quick turnaround at its ailing domestic operations.
The world’s biggest sportswear maker expects North American sales to decline again this quarter, following a 3-per-cent dip in the region last quarter. Nike’s Converse business also will drop in the current period.
The slump has forced Nike to rely more heavily on overseas growth, especially in China. International sales — along with an aggressive costcutting plan — helped the company post a first-quarter profit that topped estimates on Tuesday.
Chief executive officer Mark Parker vowed to ignite global growth by “innovative products and the most personal, digitally connected experiences in our industry.”
But it’s hard to tell how soon that vision will revive sales on the North American market.
Nike expects its annual sales to rise by a percentage in the mid-single digits, up from $34.4 billion (U.S.) last year. Its margins will narrow in the latest current period, at about the same rate as the previous three months, Nike said on a conference call.
It ranked as the worst-performing member of the Dow Jones Industrial Average in 2016.
With major U.S. retailers faltering over the past 18 months, Nike has been trying to generate more revenue through its own stores and websites.
It’s also pursuing new channels for distribution, including inking a deal this year to sell lower-end items through Amazon.com Inc.
Earnings were 57 cents per share in the first fiscal quarter, which ended Aug. 31. Analysts projected 48 cents on average.
Revenue amounted to $9.07 billion, slightly short of estimates.
This decline was offset by a surge of 5 per cent in Latin America and Pacific Asia, while Chinese sales ad- vanced 9 per cent.
Nike disclosed on Monday that it would stop reporting future orders, which investors had used as a measure of upcoming demand.
Because selling directly to consumers was becoming a bigger portion of its revenue — last fiscal year it reached 28 per cent — so-called “futures” were no longer an accurate portrayal of its business, the company said. This decision also came as orders were weakening.
After years of dominance, Nike is facing heavier competition from its traditional rivals, as well as nonathletic brands pushing into workout clothing.
To stay nimble, the Beaverton, Ore.,-based company eliminated 2 per cent of its global workforce this year, about 1,400 jobs, with half the cuts coming at its headquarters.
U.S. sneaker retailers such as Foot Locker Inc. and Finish Line Inc. say a lack of innovation and catchy styles from manufacturers have depressed demand.
Those critiques fall squarely on Nike, which has said it needs to develop shoes faster to keep up with consumer tastes that are shifting more rapidly than ever.
The company is now investing to accelerate its supply chain while making more frequent tweaks to products — updating colours, prints and materials.
The company maintained an aura of confidence earlier this year, with Parker saying its innovation pipeline would get it back on track.
Nike reiterated on Tuesday that its focus will be selling more goods directly to consumers, especially as the U.S. retail market suffers.
Revenue by that measure rose11per cent last quarter, including 19 per cent online. That will include selling through Amazon, which Parker described as being “excited about the possibilities.”
With sales now expected to decline in the first half of the fiscal year, Parker reaffirmed his confidence that its innovation pipeline would get it back on track.
“We are very bullish on what’s coming,” Parker said.