On December 22nd, Nike released its second quarter financial report for the 2024 fiscal year. From September 1 to November 30, 2023, Nike achieved a revenue of 13.4 billion US dollars, a year-on-year increase of 1%; The net profit was 1.6 billion US dollars, a year-on-year increase of 19%. In the first six months of fiscal year 2024, Nike achieved a revenue of $26.327 billion, a year-on-year increase of 1%; The net profit was 3 billion US dollars, a year-on-year increase of 8%.
Benefiting from strategic pricing measures and a decrease in sea freight rates, Nike's gross profit margin in the second quarter of the 2024 fiscal year increased by 170 percentage points year-on-year to 44.6%. As of the close on December 21st local time, Nike closed at $122.53 per share, up 0.91%, with a market value of approximately $186.5 billion.
Inventory decreased by 14% year-on-year to $8 billion
From the perspective of brand performance, in the second quarter of fiscal year 2024, Nike's revenue was 12.9 billion US dollars, a year-on-year increase of 1%; Converse's revenue was $519 million, a year-on-year decrease of 11%.
In the Nike brand category, footwear revenue increased by 1% year-on-year to $8.607 billion, accounting for approximately 67% of Nike brand revenue; Clothing revenue decreased by 1% year-on-year to 3.774 billion US dollars; The revenue from accessories was $479 million, a year-on-year increase of 17%.
Nike's wholesale business continues to face pressure due to factors such as fluctuating demand and reduced retail orders. During the period, the revenue of this business was 7.1 billion US dollars, a year-on-year decrease of 2%. Although Nike's self operated business and brand digital business revenue increased by 6% and 4% year-on-year respectively, the overall revenue growth trend is decreasing. The New Beijing News Shell Finance reporter noticed that compared to the 17% year-on-year growth in revenue in the second quarter of fiscal year 2023 and the 2% year-on-year growth in revenue in the first quarter of fiscal year 2024, the revenue growth in the second quarter of fiscal year 2024 has declined.
It is worth noting that Nike's inventory pressure, which has been criticized in recent years, has eased. During the reporting period, Nike's inventory was $8 billion, a year-on-year decrease of 14% and a month on month decrease of 8%.
Greater China achieved revenue growth for five consecutive quarters
The North American region is Nike's largest market, with revenue in the second quarter of fiscal year 2024 decreasing by approximately 4% year-on-year to $5.625 billion. Except for the North American market, Nike's revenue in other regional markets has achieved year-on-year growth. Among them, EMEA (Europe, Middle East, and Africa) revenue increased by 25% year-on-year to $3.567 billion, while Asia Pacific and Latin America revenue increased by 13% year-on-year to $1.805 billion, respectively.
Continuing the revenue growth of the first four quarters, during the reporting period, Nike's revenue in Greater China increased by 4% year-on-year to $1.863 billion, and its pre tax profit increased by 1% year-on-year to $514 million. Specifically, Nike's footwear revenue in Greater China was $1.361 billion, a decrease of 1% year-on-year; The clothing revenue was 469 million US dollars, a year-on-year increase of 19%; The revenue from accessories was 33 million US dollars, a year-on-year increase of 32%.
Nike stated that with the recovery and development of the market, offline sales in Nike's Greater China region have achieved double-digit growth during the National Day holiday. At the same time, Nike has further accelerated the implementation of its "Internet Membership Solution". As of the end of this fiscal quarter, more than 500 partner stores in more than 130 cities have joined Nike's membership system.
In addition, Nike announced that the Nike Sports Research Laboratory will settle in Shanghai in 2024, focusing on the unique needs and potential opportunities of daily runners, basketball players, and other groups, providing tailored experiences for Chinese consumers.
Reduce costs by $2 billion over the next three years
Nike's Executive Vice President and Chief Financial Officer, Matthew Friend, stated that the company's performance in the second quarter was a turning point in driving profit growth. Looking ahead to the relatively weak revenue outlook in the second half of the year, Nike will still focus on improving gross profit margins and implementing strict cost management.
Nike stated that the company is looking for opportunities to achieve a cumulative cost savings of $2 billion over the next three years. Potential areas of savings include simplifying product classification, increasing automation and technology usage, simplifying organization, and utilizing scale to improve efficiency. A large portion of the saved funds will be used to drive future growth, accelerate innovation speed and scale, and improve long-term profitability.
Nike did not provide a detailed explanation of its planned simplified product line, but stated that it will further increase investment in the women's business and Jordan brand in the future. Among them, Nike's women's business currently has a revenue scale of 9 billion US dollars, and about 40% of the brand's members are female consumers, accounting for a larger proportion of new members and growing demand faster; The Jordan brand is moving towards becoming the second largest footwear brand in the North American market. In addition to expanding its basketball business, the brand also operates in golf, football, and American football. In the past three years, the female and children's business share of the Jordan brand has increased by 7 percentage points, and the current size of Jordan's clothing business is about $1 billion, with an average growth rate of nearly 20% in the past three years.
According to reports, as part of cost savings, Nike expects to pay $400 million to $450 million in pre tax restructuring expenses in the third quarter, mainly related to employee severance pay. As early as early December, there were reports that Nike was quietly laying off employees, involving businesses such as human resources, recruitment, procurement, branding, engineering, digital products, and innovation.
In addition, Nike has lowered its performance guidelines for the entire fiscal year, with revenue growth of only 1%, which is lower than the previously estimated median percentage. Nike expects a slight negative growth in revenue in the third quarter and a low single digit growth in revenue in the fourth quarter. But Nike remains confident in its gross profit margin for the entire fiscal year, expected to increase by 140 to 160 percentage points.
After the financial report was disclosed, Nike's stock price plummeted in post market trading. As of press release, Nike's stock price fell 11.69% after market hours.