Nike Stock Falls on Sales and Guidance Miss. It’s Still Losing Market Share.
Updated June 27, 2024 6:00 pm EDT / Original June 27, 2024 3:30 am EDT
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topped fiscal fourth-quarter earnings estimates, but sales and first-quarter guidance fell short amid softer consumer demand in North America and China.The maker of athletic apparel reported adjusted earnings of $1.01 a share on $12.6 billion in revenue. Analysts polled by FactSet had penciled in 84 cents on $12.9 billion.
Sales fell 2% year over year on a reported basis, dragged lower by an 8% decline in direct-to-consumer sales. Encouragingly, wholesale revenue rose 5% from the year-ago quarter. Gross margins also improved, up 1.1 percentage points to 44.7%.
Nike’s full-year revenue missed estimates as well. The company reported $51.4 billion in revenue, a hair shy of the $51.6 billion analysts had planned for. Adjusted earnings of $3.95 a share were above estimates for $3.70 a share.
Nike stock fell 11% to $83.67 in the after-hours session Thursday. The shares have shed 13% this year.
Wall Street had been bracing for a lackluster report from Nike, yet the stock’s downturn Thursday suggests Nike’s report was worse than many investors bargained for. Nike has been plagued by slower sales growth in key markets, a sluggish product innovation cycle, rising competition, and cooling consumer spending in the U.S.
The company continued to lose market share throughout the quarter, ceding it to competitors such as On Holding,
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New Balance, and Hoka, wrote M Science analyst Drake MacFarlane ahead of earnings. Nike’s share of digital purchases averaged 32.5%, down from 34.1% in the year-ago quarter.Nike’s footwear revenue in North America—the company’s largest markets—fell 6% year-over-year in the fourth quarter. Hoka sales, in contrast, jumped 34% from the prior year.
“This longtime industry bellwether continues to surprisingly struggle, and we believe that investor patience with management is getting thinner by the day,” wrote Wedbush analyst Tom Nikic in a note Thursday. “Over the long run, NKE has been one of the most successful growth stories in our coverage, and we keep waiting for the brand to regain its mojo. But it looks like we’re going to have to keep waiting longer.”
Nikic rates the stock Outperform.
The company’s guidance for fiscal 2025 did little to assuage investor concerns. Nike believes full-year revenue will be down mid-single digits, with the first half down high single digits. In March, Nike said sales in the first half of the year would be down by low single-digit percentages year over year.
First-quarter revenue will be down about 10% compared with a year ago, said Chief Financial Officer Matthew Friend on a call with investors Thursday. Analysts had projected a roughly 3% decline.
“We’ve been navigating several headwinds which we now expect to have a more pronounced impact on fiscal 25,” Friend said.
On top of the challenges the company has faced in the past two years, Nike believes sales will take a hit from a softer consumer outlook in China, muted wholesale orders, and weaker-than-expected online sales for its lifestyle business.
Nike’s plans to limit the supply of some classic footwear styles will also weigh on sales in the short term, Friend said, although the company believes the move will help protect price points in the long run.
Heading into earnings, there was growing optimism the company might be close to seeing the light at the end of a very, very long tunnel. Oppenheimer analyst Brian Nagel upgraded the stock to Outperform last week, arguing that this could be Nike’s “last bad” earnings report.
Barron’s also made the case for readers to buy Nike stock ahead of the company’s earnings. We said that while this earnings report would be less than stellar, there are several catalysts ahead for the stock, including the Paris 2024 Olympics and a new product lineup that could help the company claw back market share.
Write to Sabrina Escobar at sabrina.escobar@barrons.com