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Nike Stumbles as Gloomy Forecast Sends Shares Sprinting Downward

Posted June 28, 2024 at 10:00 am
Tim Fries
The Tokenist
NKE

Nike’s fourth-quarter earnings report revealed mixed results, with the company beating earnings expectations but falling short on revenue.

Nike, Inc. (NYSE: NKE) reported its fourth-quarter earnings for fiscal year 2024, revealing mixed results and a disappointing forecast that sent shares tumbling in after-hours trading. The sportswear giant beat earnings expectations but fell short on revenue, signaling challenges ahead for the world’s largest athletic apparel company.

Nike’s Q4 Earnings and Fiscal Year 2024 Results

Nike reported adjusted earnings per share of $1.01, surpassing analyst expectations of 83 cents. However, revenue for the quarter came in at $12.61 billion, falling short of the anticipated $12.84 billion and representing a 2% decline from the previous year. Net income for the quarter rose to $1.5 billion, or 99 cents per share, compared to $1.03 billion, or 66 cents per share, a year earlier.

For the full fiscal year 2024, Nike’s sales remained flat at $51.36 billion. The company saw mixed results across its global markets, with China sales exceeding expectations at $1.86 billion, while North America, Europe, Middle East and Africa, and Asia Pacific and Latin America regions all fell short of projections.

More importantly, Nike’s direct-to-consumer revenues declined 8% to $5.1 billion, while wholesale revenue increased 5% to $7.1 billion. The Converse brand, owned by Nike, experienced a significant 18% drop in revenue to $480 million.

Nike Shares Plunge on Firm’s Weak Sales Forecast

Nike’s outlook for the coming quarters has alarmed investors and analysts alike. The company expects sales to drop 10% during its current quarter (Q1 fiscal 2025), far exceeding the 3.2% decline analysts had anticipated. For the full fiscal year 2025, Nike forecasts sales to be down in the mid-single digits, a stark contrast to previous growth expectations.

The sportswear giant cited several factors contributing to its gloomy forecast, including slower online sales, planned declines in classic footwear franchises, increased uncertainty in the Chinese market, and uneven consumer trends across its markets.

Nike also faces growing competition from upstart rivals like On Running and Hoka and a potential shift in consumer preferences towards denim and dressier styles.

In response to the disappointing forecast, Nike’s shares plunged approximately 11-12% in after-hours trading, potentially leading to a $15 billion loss in market value. As of 6:42 AM EDT in pre-market trading, the stock was down 14.49% to $80.54.

Despite the current challenges, Nike maintains a market capitalization of $142.167 billion and remains a favorite among analysts, with the majority maintaining “Buy” or “Strong Buy” recommendations. However, the company’s year-to-date return of -12.59% significantly underperforms the S&P 500’s 14.95% gain, highlighting Nike’s hurdles in regaining its market momentum.

Originally Posted June 28, 2024 – Nike Stumbles as Gloomy Forecast Sends Shares Sprinting Downward

Disclaimer: The author does not hold or have a position in any securities discussed in the article.

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