Little optimism from NIKE’s short term outlook as reset expected to impact 1H25 growth (Autumn 24) NIKE’s Q3 earning may have been slightly ahead of consensus expectations ($0.77 vs FactSet cons £0.76), helped by gross margin and a reasonable US performance (see overleaf for detail), but the market focused on management’s FY25 outlook. NIKE (N/R) has a May financial year end. Management guided to FY25 revenue and earnings growth with margin expansion, excluding restructuring costs, but 1H revenues (June to November) are expected to be down low single digit with momentum building throughout the year and into FY26. 1H25 revenues will be impacted near term from the lifecycle management of key product franchises such as Air Force One & Pegasus, with management looking to restrict availability and shift to increasing innovation, such as the Air Max Dn (launch next week). It also expects the subdued global macro-outlook to continue. As part of its brand reset and return to growth and sustainable high margins, NIKE’s management is focused on 4 areas: 1) Sharpen its focus on sport; 2) Ensure a continuous flow of innovative product; 3) Bolder marketing; and 4) Lean into its Wholesale partners to elevate the brand and grow the total marketplace. In Q3, new and updated footwear models accounted for the majority of NIKE’s top 20 growing footwear franchises. NIKE admits that more recently it has been too focused on achieving the 40% digital or 60% direct mix targets, when the consumer is clearly shopping in a multi-brand retail. This suggests NIKE will offer its Wholesale partners more support. JD Sports due to give FY25 guidance on 28th March. 1H could still be challenging JD not only has tough comps in 1H25 (1H24 Sports Fashion sales +8.9%; 2H24E 4%), but it is clear from NIKE’s Q3 comments that there are likely to be lower levels of key NIKE stock lines in calendar 2024 as NIKE reins in key legacy franchises. We believe the Air Force One Lifestyle franchise is a particularly important one to JD. The question is whether Adidas and other brands can sufficiently fill NIKE’s innovation and volume headwind to maintain reasonable sales momentum in FY25. Continued overleaf