Nike reported a surprise drop in fourth-quarter revenue on Thursday, as the sportswear maker struggled with low demand for its apparel and footwear amid rising competition from brands such as On and Hoka.
Shares of the company fell 4.6 percent in extended trade.
Even though Nike has outlined a plan to streamline its portfolio, analysts note that it would be some time before the sportswear company can revive demand as innovation and launches of new product lines take time.
Nikeâs efforts to drive more sales through its direct-to-consumer channel have also taken a hit as customers turn more picky about their non-essential spending and look to spend their dollars on more fashionable and innovative brands such as On and Deckersâ Hoka.
Nike is also losing ground to rival Adidasâ retro-style Gazelle and Samba sneakers, which have helped the European sportswear maker see a rebound in demand after its damaging break-up with rapper Ye.
The Air Jordan maker is also doubling down on wholesale partnerships after years of pulling back on distribution. Nike executives in March acknowledged that their direct-to-consumer push was not driving growth and had instead led to a drop in its market share.
Fourth-quarter gross margin increased 110 basis points to 44.7 percent, primarily due to Nikeâs plan to cut costs through layoffs and reduced supply of some of its underperforming products as well as lower ocean freight rates and logistics costs.
Nikeâs net revenue fell 1.71 percent to $12.61 billion, compared with analystsâ average estimate of a 0.13 percent rise to $12.84 billion, per LSEG data.
The companyâs net income for the reported quarter rose 45 percent to $1.50 billion, or 99 cents per share, compared with $1.03 billion a year earlier.
By Juveria Tabassum and Ananya Mariam Rajesh; Editing by Shinjini Ganguli
Learn more:
Nike Layoffs Reach Its European Headquarters in the Netherlands
Nike is laying off about 2 percent of its global workforce as part of a plan to slash $2 billion in costs.
