Nike Inc. reported a 3% decline in revenues in North America in its second quarter, with wholesale sales down 9% in the region. The company’s CFO, Matthew Friend, attributed the decline to actions taken to reduce inventory excesses. Nike warned that it expects Q3 revenue to be slightly negative and Q4 revenue to be up in the low single digits. For the full year, revenue is expected to be up 1% compared to the prior year.
Nike’s stock fell almost 12% in premarket trading following the second quarter report, and the drop from Nike caused more than 81 points to be pulled from the Dow. Shares of some of Nike’s retail partners, including Foot Locker, Dick’s Sporting Goods, and Hibbett, were also down before the markets opened on Friday. Competitors like Adidas, Under Armour, and On also saw their shares decline.
Despite the trouble in North America this quarter, Nike reported mixed results for Q2, with revenues up 1% to $13.39 billion, which was slightly short of analysts’ expectations. Diluted earnings per share amounted to $1.03, up 21% year-over-year and ahead of estimates that projected EPS at 85 cents for Q2.
The company plans to save up to $2 billion in costs over the next three years by simplifying their product assortment, increasing automation and the use of technology, streamlining their organization, and leveraging their scale to drive greater efficiency.
Nike saw mid-single-digit retail sales growth with key partners like Dick’s Sporting Goods, JD Finish Line, and Hibbett; however, the Swoosh did not mention Foot Locker, another key retail partner that recently touted its strong Nike relationship. Friend added that the company is seeing the “highest mix of current season inventory” that it has seen in several seasons across most of its retail partners.
“When we look at the level of inventory in our partners relative to their current level of retail sales, we feel good about the weeks of supply that we have there,” Friend said. “We feel great that our partners are positioned to put our newest and most relevant product in front of the consumer.”