Nike announces potential job cuts as sales growth slows to a 14-year low.

• Nike announced that it may reduce its financial forecast for 2025 due to ongoing difficulties in its operations.
• In the fiscal fourth quarter, the sneaker giant exceeded earnings estimates but missed Wall Street's sales forecasts.
• Nike executives attributed the sales miss to a slowdown in lifestyle sales, among other factors, according to CNBC.

The sneaker giant reported its slowest annual sales growth in 14 years, excluding the Covid-19 pandemic, and warned of "challenges" that led it to cut its current year outlook on Thursday.

"We are striving for better balance in our portfolio. Although we are pleased with our advancements, our fourth quarter results have brought to light obstacles that have prompted us to revise our Fiscal '25 projections," finance chief Matthew Friend stated in a press release. "We are implementing measures to enhance NIKE's competitiveness and promote sustainable, profitable long-term growth."

Nike's guidance is not precise, and it is usually disclosed during its earnings call at 5 p.m. ET.

In the last quarter, the company stated that it anticipates revenue and earnings to increase in fiscal 2025, but did not specify the percentage growth. Additionally, the company announced that it expects revenue in the first half of fiscal 2025 to be down low single digits, reflecting a "subdued macro outlook around the world."

Shares were down about 6% in extended trading.

In the fiscal fourth quarter, the company surpassed earnings expectations due to its ongoing cost-saving initiatives, but Nike missed revenue forecasts.

Based on a survey of analysts by LSEG, Nike's performance during the period exceeded Wall Street's expectations.

• Earnings per share: $1.01 adjusted vs. 83 cents expected
• Revenue: $12.61 billion vs. $12.84 billion expected

In the three-month period ending May 31, the company's net income was $1.5 billion, or 99 cents per share, compared to $1.03 billion, or 66 cents per share, in the previous year.

A year ago, sales were $12.83 billion, but they decreased to $12.61 billion, resulting in a 2% drop.

In fiscal 2024, Nike's sales remained flat at $51.36 billion, marking the slowest growth rate since 2010, except for the Covid-19 pandemic.

Nike executives attributed the sales miss to a decline in its lifestyle business during the quarter, weak online sales in April and May due to a higher share of lifestyle products, and declining traffic in China beginning in April due to macro conditions in the region.

Although China experienced a decline in traffic, sales in the region surpassed Wall Street expectations, with a total of $1.86 billion, exceeding the estimated $1.79 billion. This made it the only geographical segment to meet expectations for the period.

Despite being its largest market, North America's sales totaled $5.28 billion, which fell short of StreetAccount's forecast of $5.45 billion.

In Europe, Middle East and Africa, Nike generated $3.29 billion in revenue, while in Asia Pacific and Latin America, the company recorded $1.71 billion in sales.

Sneaker leader loses its crown

Recently, the leader of the sneaker and athletic apparel industry has been facing challenges, including slow revenue growth, criticism for lacking innovation, and abandoning its direct-sales strategy.

Nike had been focusing on driving sales through its own website and stores instead of wholesalers like Under Armour, but it recently admitted that it went too far with this strategy and began walking back it, stating that it had gone too far when it moved away from wholesalers.

By implementing a more strategic approach, companies can gain greater control over their branding and customer data, but this may also result in additional logistical challenges and unforeseen, costly complications.

In the quarter, Nike's direct revenues decreased by 8% to $5.1 billion, while wholesale revenue increased by 5% to $7.1 billion, indicating Nike's shift in strategy towards direct selling.

Some analysts claim that Nike's emphasis on developing its direct sales strategy caused the company to neglect innovation, which had been its unique selling point for years.

Upstart brands like On Running and Hoka captured the attention of runners with innovative designs, while the retailer continued to offer old favorites like Air Force 1.

Nike plans to reduce its product offerings and focus on new innovations in order to improve its financial stability, with the hope that new styles and the 2024 Paris Olympics will help the company achieve this goal.

"Our CEO, John Donahoe, stated in a release that we are tackling our immediate challenges while making significant advancements in key areas for NIKE's future, including performance innovation, keeping pace with consumers, and expanding our marketplace. He is confident that our teams are aligning our competitive advantages to maximize our impact on the business."

Nike faces challenges both within and outside of its control. The company has been affected by a challenging macroeconomic environment, with consumers cutting back on new sneakers. Additionally, Nike may be struggling to keep up with changing trends, as denim is making a comeback and consumers are looking to dress up after years of dressing down. Some analysts predict that the overall athletic category will experience a slowdown this year.

To maintain profits amidst unstable sales, Nike has focused on reducing expenses.

In December, the company announced a broad restructuring plan to reduce costs by approximately $2 billion over the next three years. Two months later, it announced it was shedding 2% of its workforce, or more than 1,500 jobs, in order to invest in its growth areas, such as running, the women's category, and the Jordan brand.

— Additional reporting by CNBC's Sara Eisen and Jessica Golden.