What Nike’s slashed full-year guidance signals about consumers

Shares of Nike (NKE) continue to fall, with the stock down 21% in the last five days. The company posted its second quarter results after the bell on Thursday, cutting its full-year revenue guidance and citing pressure from changes in consumer habits.

Yahoo Finance anchor Julie Hyman joins Wealth! to break down Nike’s latest quarterly performance and what it signals for the company and the state of the consumer.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Nicholas Jacobino

Video Transcript

Nike shares slipping and falling can’t get up right now.

After cutting its full year revenue guidance, the retailer saying that there’s more pressure weighing on consumers and customers here to discuss what the earnings report tells us about consumers.

Yahoo Finance’s very own.

Julie Hyman is here.

Hey, Julie, hi there.

So I know this is one of your favorite topics to talk about.

Talk about the shoe universe being the sneakerhead that you are.

Um, unfortunately, the number is not looking so good for Nike and the shares are actually having their biggest one day decline in 23 years, Brad.

So when you look at these numbers here and I’ll talk about what this means for the consumer in a second, you saw a decline in the first quarter in those, in that revenue number of 1.7%.

And Nike is now saying that that will decline 10% in its fiscal first quarter, which is what we’re in right now and that for the full year, we will see a decline what in the low single digits here, um, for that revenue.

So what is going on in Nike?

Well, part of it is a Nike problem.

Part of it is a macro problem, right?

We saw the sales week in China in particular, but I talked to Anisha Sherman who covers the company over at Bernstein this morning.

And she said what we’re seeing is kind of a little bit of both.

So you’ve got a choosier consumer because the consumer is more stretched.

You compare this.

She said to the period a couple of years ago when they were seeing big gains in revenue and people had money because of stimulus, credit card, delinquencies were lower.

We were seeing bigger wage gains.

Now, all of those elements have moderated at the same time that Nike is not innovating.

So in other words, I don’t know what your shoe shopping habits have been like recently, but she said what we’re seeing not just at Nike, but across the board is that there has to be more newness, more innovation, more reasons for people to buy.

If they’re gonna be spending that money that the retailers have to like, sort of take it the extra mile.

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Yeah, mine is right now.

All the stuff that my parents didn’t get me when I was growing up.

So there’s the nostalgia factor and there’s that, hey, I can finally do it.

I’ll get it.

But then there’s also the thought process for a lot of consumers that emerges.

Ok?

I should have enough at this point.

And I think that’s where a lot of people are kind of pushing back even on some of those purchases that they would deem as more nostalgic even if Nike has leaned into certain parts of that brand right to emanate that well, Nike.

So now Nike is sort of trying to refresh a lot of its existing brands, but she said that’s gonna be a difficult transition.

The company itself has said that as well as we kind of to see how those new models are going to be received.

But again, it is not just with Nike as Anisha pointed out, tapestry similarly cut its outlook but is still seeing strong demand for newer in coach, for example, for the newest bags for the freshest stuff.

So it’s not that consumers don’t want anything but they really need to be pursued, waited in order to be buying this new stuff.

What I like to hear um Sam Poser recently, Williams trading um came out with sort of some negative commentary on Nike and he said Nike is in a push model situation where they’re really trying to convince people there, there’s not a pull from consumers, it’s not like anything Nike does, it gets snapped up.

They really are trying to push some new stuff on consumers and consumers are not convinced.

Yeah, it’s been interesting, especially within this consumer environment, the Olympics, a big potential um showcase environment for a lot of different brands internationally.

Nike sounds like they’re gonna be banking on that a little bit more.

They are a little bit, but it is telling that again, in this current quarter, they’re looking for a 10% revenue decline and then declines are expected to moderate in the second half of the year.