By Ananya Mariam Rajesh and Nicholas P. Brown
(Reuters) -Nike withdrew its annual revenue forecast on Tuesday, just as a new CEO is set to take the helm at the sportswear giant that is staring at a holiday season likely to be filled with discounts and weak traffic on its website and mobile apps.
The news sent Nike (NYSE:NKE)'s shares tumbling 6% in after-market trading. They had seesawed earlier after the company posted disappointing quarterly sales growth but beat Wall Street estimates on profit.
Nike also postponed an investor day scheduled for Nov. 19.
Traffic declines across Nike-owned stores and websites were more pronounced than anticipated, leading to an inventory backlog, Nike CFO Matthew Friend said on a post-earnings call that was not attended by outgoing CEO John Donahoe.
Friend also said that sales declined despite higher promotions at stores owned by its wholesale and retail partners.
The company's growth has stalled recently, squeezed by nimbler, on-trend rivals such as On and Deckers' Hoka. Last month, the company said it was bringing back company veteran Elliott Hill to right the ship, succeed Donahoe as CEO.
Nike's stock has fallen 18% so far this year. It has recouped 10% since Sept. 19, when the company announced Hill's appointment.
Withdrawing the outlook would give Hill the much-needed flexibility to evaluate Nike's strategies and business trends, and "develop plans to best position the business for fiscal 2026 and beyond," Friend said. Nike had earlier forecast an annual revenue decline in the mid-single digits.
In lieu of an annual guidance, Nike offered outlook for its September-November quarter, forecasting a drop in sales between 8% and 10%, steeper than the 7% that analysts had predicted, according to estimates compiled by LSEG. It expects gross margins to fall about 150 basis points in that period.
"We expect that the return to strong growth will take time," Friend said, "but we believe we have all the right building blocks, especially with Elliott now leading us."
Hill will be tasked with rebuilding Nike's wholesale partnerships that had tapered under Donahoe, who focused instead on bolstering sales through the company's own stores and websites. The strategy had led U.S. retailers such as Foot Locker (NYSE:FL) and Dick's Sporting Goods (NYSE:DKS) to quickly fill Nike's vacated shelf space with fashionable competitors.
Hill was Nike's general manager for North America during a difficult stretch in 2010, Friend said, when the company returned to growth through "reprofiling the marketplace around sport." It needs a similar tack now, he added.
"When we say things like 'we need to sharpen our focus on sport,' it doesn't just mean that we need to sell more performance products," he said. "What it means is that we have to create deeper connections with consumers through sport."
Nike's overall net revenue in the first quarter declined 10.4% to $11.59 billion, slightly worse than the 10% fall estimated by analysts.
Analysts say the company is yet to see benefits from its drive to fast-track innovation and revive demand through new product launches like Air Max Dn and Pegasus 41.
"I am pretty disappointed by the revenue number here," said Dave Wagner, head of equities at Aptus Capital Advisors, which has a stake in Nike. "This is not a great report ... from a quantitative standpoint, but also from a qualitative standpoint of canceling the investor day."