Nike is looking to “aggressively” re-establish its innovative edge after weaker than expected fourth quarter sales prompted a downgrade of its 2025 forecast. 

“We’re sharpening our focus on sport, accelerating our pace and scaling of newness and innovation, driving bigger, bolder storytelling, and elevating the entire marketplace to fuel brand distinction and be in the path of the consumer,” Nike president and CEO John Donahoe told investors on a conference call yesterday (27 June).

The sportswear giant’s fourth quarter revenue fell 2% to $12.6bn (£9.6bn), with direct-to-consumer sales down 8% to $5.1bn (£4.3bn). Revenue for the full year ending 31 May 2024 was $51.4bn (£40.6bn), up 1% from $51.2bn (£40.4bn) the year prior.

As a result of “navigating several headwinds”, Nike expects its first quarter revenue for 2025 to be down approximately 10%, with Donahoe dubbing this period a “transition year” for the business.

“Although the next few quarters will be challenging, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive sustainable, profitable long-term growth,” chief financial officer Matthew Friend added.

In the ‘speed lane’

Donahoe highlighted the company’s “strategic shifts” over the past year, including starting its multi-year innovation cycle.

“We’ve been accelerating our innovation pipeline, including pulling forward several innovations, some by more than a year. We’re moving aggressively to re-establish our innovation edge,” he explained.

A top priority in Nike’s innovation pipeline is boosting speed to market. The company already had an “express lane” for short lead time replenishment and “hyperlocal design”. The sportswear giant has now added a “speed lane”, described as a new approach to streamlining the production process which reflects a wider ambition to become more responsive to consumer demands.

An example is the Bowerman Footwear Lab, where the company is accelerating design using “advanced digital tools” and collaborating with manufacturing partners to fast-track product testing and production.

Almost half of large businesses leaning on innovation to grow

Nike’s lifestyle business, including men’s, women’s and Jordan lines, all declined during the fourth quarter, directly impacting digital sales.

The digital sales fell 10% in the quarter, missing fourth quarter targets due to softer traffic, higher promotions and lower sales of certain classic footwear franchises.

These franchises contributed to the underperformance of the overall digital business. As a result, Friend said the company is “aggressively adjusting” its forward-looking plans for these lines on Nike Digital.

“We expect these actions to create several points of short-term headwinds on revenue in fiscal 2025. However, our past experience gives us confidence that proactively rebalancing our portfolio will strengthen our competitive position and fuel brand momentum as we take the consumer somewhere new,” he said.

Nike to move away from promotions in search of ‘profitability recovery’

Looking ahead, the business views the Paris Olympics as a “pinnacle moment” to communicate its vision of sport, which will include a new brand campaign.

“Our brand storytelling will be bold and clear, with sport and athletes at the very centre of it all, from brand voice to retail activations,” Donahoe said.

“This summer, we will cut through the clutter to create powerful energy for the Nike brand. We’re back doing what we do best, creating impactful storytelling and, ultimately, brand distinction in sport.”

As Nike looks to return to growth in 2025, its goals are to “read and react to the consumer” and “maximise full-price sales across all channels”.

Earlier this year, Friend expressed confidence in Nike’s ability to raise prices when needed, noting inflation was easing in most economies. This quarter, he explained the company has successfully maintained high levels of full-price sales across its franchises.

The brand is reinvesting nearly $1bn (£791m) in consumer facing activities in 2025. This includes increasing resources in design, product creation and merchandising for its key sports, as well as “deepening” its sports marketing portfolio. Additionally, Nike hopes to “elevate the distinction” of its brand in physical retail and drive “bolder” campaigns, for example around the Olympic Games.

During the fourth quarter, Nike invested $1.1bn (£870m) in “demand creation”, matching last year’s spending. While sports marketing expenses decreased, this was balanced by increased advertising and marketing spend.

“We expect full-year SG&A [selling, general and administrative expenses] growth to be up slightly versus the prior year as we increase investments in demand creation to ignite brand momentum and maximise reach and impact, while holding operating overhead largely flat,” Friend added.