10:07 AM EDT, 10/02/2024 (MT Newswires) -- Nike ( NKE ) is moving toward affordability to draw shoppers run down by inflation as it tries to work through a backlog of products globally.

The footwear and apparel giant said fiscal 2025 first quarter revenue plunged 10% to $11.6 billion, while earnings dropped 26% year-over-year to $0.70 a share. Sales in North America dropped 11% on an annual basis, while revenue in Europe, Middle East and Africa lost 13%. Asia Pacific and Latin America was down 7% and greater China sales fell 4%, the company said. Moderating retail sales and decelerating traffic led to increased inventory in China in an already discounted sales environment, Nike ( NKE ) said.

The company will begin offering "new franchises below $100" to make their products more attractive to budget-conscious consumers, Chief Financial Officer Matthew Friend said on its earnings call. Nike ( NKE ) defines that segment as a "core opportunity" and has been moving quickly to bring products under that cost threshold to the market. Runners in North America also gave the company a boost as sales were up double digits for the segment in the first quarter.

"This represents several billion dollars' worth of revenue that we walked away from over the last couple of years, and our partners are very excited about the new product that's coming in this dimension," Friend said. "So running and core are the two areas where we're most optimistic that we see momentum building from an innovation and newness perspective."

Wholesale customers have been receptive to Nike's ( NKE ) innovation efforts, and executives seem upbeat about new lower-cost offerings, Oppenheimer analysts Brian Nagel, Andrew Chasanoff and William Dossett said in a note to clients.

"Senior leadership remains optimistic around the product pipeline in running footwear and apparel, and announced plans for new running franchises priced below $100, allowing the brand to be more accessible to lower price-point customers," the analysts said.

While Nike ( NKE ) withdrew its 2025 guidance as its quarterly earnings were announced just before the arrival of new Chief Executive Elliott Hill, who will take over the company on Oct. 14, Morgan Stanley analysts said bears will have more fodder than bulls moving forward due to the downbeat tone in the first quarter and a questionable outlook.

Challenging demand trends, rising inventory levels and gross margin headwinds have all become more of a drag on the company than they were three months ago, the analysts said.

"While CEO transition is underway, (near-term) fundamentals remain challenged, the steady-state growth and profitability trajectory highly uncertain (especially considering a more competitive/fragmented landscape) and company strategy still not entirely clear, we think the outstanding debate will linger and the stock will prove range-bound," said Morgan Stanley, which has an equal-weight rating on the stock.

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