Nike And Lululemon's Near-Term Lackluster Outlooks Dimmed Their Earnings Beats

Like Lululemon Athletica LULU, Nike Inc NKE topped its latest earnings expectations. But shares of both Lululemon and Nike tumbled on Friday. Despite the earnings beat with holiday sales also surpassed expectations, Nike’s outlook included a drop in sales during the first half of the 2025 fiscal year due to its product portfolio shift. To fight for market share with newer brands like Lululemon, Nike intends to replace older styles with trendier sneakers.

Lululemon continues to capture more market share from luxury retail consumers. But on Thursday, Lululemon also flagged a drop in annual revenue and profit due to waning demand mainly in the region. Therefore, Lululemon is also grappling with a demand slowdown and growth stagnation in North America despite its holiday sales surpassing estimates.

Fiscal Third Quarter Results

For the quarter ended on February 29th, Nike reported revenues rose 0.3% to $12.43 billion, topping LSEG’s estimates of $12.28 billion. Greater China revenue expanded 5% to $2.08 billion but growth decelerated. North American revenue grew 3% to $5.07 billion, but EMEA revenue contracted 3% to $3.14 billion due to a weakened macroeconomic backdrop. Earnings per share amounted to 77 cents as Nike reported a net income of $1.17 billion.

Nike is betting its future on reviving its running shoe category.

In order to bring its running shoes to life, Nike will be trimming supplies of classic shoes such as its Air Force 1 and Pegasus. Therefore, Nike guided for a low single digit revenue decline during the first half of fiscal 2025.

Chief Financial Officer Matthew Friend reiterated that full-year fiscal 2024 revenue will be up about 1%.

Back in December, Nike already scaled back its growth projections for fiscal 2024 due to weakness in overseas markets, notably Greater China and Europe, Middle East and Africa. It also announced it will be cutting costs for about $2 billion over the next three years.

Delighting customers and disrupting the industry takes hard work.

With the launch of its newest Nike Air innovations for athletes, Nike believes that the Paris Olympics will serve as a catalyst for its brands that are in for a style change. But the outlook of both Nike and Lululemon reflect an unfavorable macroeconomic environment that will continue to squeeze their consumers.     

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