Nike set for rare sales drop with focus on U.S. demand

Nike is projected to post its first quarterly revenue decline in nearly two years on Thursday, turning the spotlight on the slower-than-expected boost from its direct-tocustomer

(DTC) strategy and sluggish demand in North America.

The sportswear giant has invested in selling more through its own sales channels, including stores and online, instead of increasing inventory at wholesalers to bolster its margins.

However, analysts have said that the DTC plan has been hit by stagnant innovation for the Air Jordan maker's sneakers and rising competition

from newer brands like On and Decker's Hoka that are grabbing market share in the running category.

"If the products are not that popular, doesn't matter where you sell them, people won't buy them," Morningstar analyst David Swartz said, adding that Nike's DTC strategy is not working as well as the company would have hoped for.

Nike is expected to post a near 1 per cent decline in its

third-quarter revenue and least five brokerages cut their price targets ahead of the report after the closing bell on Thursday. Its per-share profit is expected to fall about 7 per cent to 74 cents, according to LSEG data.

Nike has not spent a lot of money on innovation and it is "starting to get stale" and reflected in the way consumers are spending on its products, said Brian Mulberry, client portfolio manager at

Zacks Investment Management, which has a stake in the company.

DTC revenue at Nike has hovered around the 42 per cent of total sales level in recent quarters, with wholesale generating nearly all of the rest.

Meanwhile, the wholesale business, particularly in the U.S., has remained under pressure as sportswear retailers place fewer orders due to patchy demand.