Why did Nike's net profit decline in Q1 2025?

Nike's net profit decline in Q1 2025 can be attributed to a combination of factors:

1. Sales Decline: Nike experienced a 9% decrease in third-quarter sales, which was primarily driven by a slowdown in sales across all major markets and operating segments. This decline was evident in both wholesale revenues, which fell 7% to $6.2 billion, and footwear sales, which dropped 12% in the key holiday quarter. The decline in sales was further exacerbated by new tariffs and declining consumer confidence, which collectively contributed to a projected double-digit percentage drop in sales for the current quarter.
2. Inflationary Pressures: The impact of inflation on family budgets strained consumer purchasing power, thereby affecting Nike's sales. Inflation-induced pressures are likely to have influenced consumer behavior, leading to reduced demand for Nike's products.
3. Inventory Management: Nike faced challenges with inventory management, which resulted in higher inventory write-downs and costs. These costs, coupled with increased expenses related to clearing old inventory to make way for new styles, adversely affected gross margins. Gross margin for the quarter decreased by 3.3 percentage points to 41.5%, primarily due to these factors.

In summary, Nike's net profit decline in Q1 2025 was a result of a combination of sales decline, inflationary pressures, and inventory management challenges. These factors collectively impacted the company's profitability during the quarter.