On Thursday, Nike Inc. (NYSE: NKE) reported slow current quarter revenue growth due to obstacles to regain market share in the U.S. from rival, Adidas. Gross margin is also predicted to decrease by 125 to 175 basis points due to stronger dollar and higher costs related to new releases. The retailer’s third quarter revenue growth was slightly below the rate compared to the previous quarter while shares were down at $63.74. The company’s U.S. revenue fell 5% which marked the second straight quarter of declines following a move to sell more footwear at full price, thus possibly seeing negative results until the next quarter. Nike’s stumble in revenue was also driven by the weakening of wholesale distribution channels due to bankruptcies of sports chains such as Sports Authority and Sports Chalet earlier this year.
Currently, the retailer has been moving focus to sales throughout their store locations and website as well as their pilot program with Amazon to sell a limited variety of certain items. The second quarter’s online sales surged 29% while Nike aims to raise the share of digital sales to total revenue from 15% to 30% over the next 5 years. Furthermore, Nike’s international market including quarterly revenue from Greater China rose 16% while the European region surged 19%. This market has been contributing a good portion of revenue since declining sales in North America has taken a toll for the retailer.
Additionally, Nike has stepped up their advertising to regain market share from Adidas’ retro Superstar and Ultraboost shoes. 50% of the future sales growth is expected to come from new categories while 75% will come from outside the U.S.
“In third quarter in particular, we expect reported revenue growth at or slightly below the rate of reported revenue growth that we delivered in the second quarter,” Elliott Hill, President of Geographies and Sales said in a post-earnings call.