Nike Financial Outlook: Revenue may decline but gross profit margin is expected to increase
As a leading global designer, marketer, and distributor of sports shoes and clothing, Nike will disclose its financial performance for the third quarter of the 2024 fiscal year on March 21.
As a leading global designer, marketer, and distributor of sports shoes and clothing, Nike will disclose its financial performance for the third quarter of the 2024 fiscal year on March 21. Before the financial report is released, let's make a forecast for Nike's performance.
Income may decrease
Nike's revenue in North America is expected to decline by 2%, due to challenging wholesale comparisons. Despite positive feedback from wholesale customers like Foot Locker, Nike's popular product lines such as Air Force 1, Dunk, and Air Jordan 1 have performed strongly.
The gross profit margin may increase
On the positive side, there are some factors that may boost Nike's financial situation. The company's gross profit margin is expected to expand, partly due to reduced shipping costs and strong performance in direct to consumer (DTC) channels.
In addition, strategic price increases and sustained growth in the Chinese market (although slowing) are also considered supportive factors. From a cost perspective, Nike's plan to save $2 billion over the next three years is expected to improve operational efficiency, although a significant portion of it will be reinvested.
Maintain stable long-term growth
In the long run, Nike's growth will remain steady. It is expected that in the 2025 fiscal year and beyond, the company's revenue will grow at a median single digit growth rate, because the company is moving towards a direct sales model, which has accounted for 44% of its revenue and continues to support its financial situation.
Olympic assistance
As the Olympics approach, Nike is preparing to launch new products, which may lead to sales growth and therefore requires close attention.
Risk still exists
Although there is expected to be some positive momentum, investors who decide whether to invest in Nike before the performance release must also consider downside risks. According to Sensor Tower's data, the download volume of Nike mobile applications has decreased year-on-year, and the growth rate of mobile application users has also slowed down. Google Trends data also shows a year-on-year decrease in searches for Nike.
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