Saturday, July 20, 2024

Nike stock sank after the company projected a bigger-than-expected sales decline in 2025

Nike ( NKE ) shares fell nearly 14% in premarket trading on Friday after the retailer said it expects revenue to be lower than previously thought in the coming year.

The company said Thursday that it expects revenue to decline in the mid-single digits in 2025, including an expected 10% decline in the first quarter. Nike initially guided for overall sales growth through 2025.

The guidance reflects Nike’s continuing trend through the fourth quarter of fiscal 2024, the shoemaker announced after hours on Thursday. Quarterly revenue in the fourth quarter fell 2% from a year earlier to $12.61 billion, compared with Wall Street’s estimate of $12.86 billion. Meanwhile, Nike’s earnings per share of $0.99 beat analysts’ expectations of $0.66. Nike’s direct-to-consumer sales fell 8% from the same quarter a year ago to $5.1 billion.

“Finance [2025] It will be a transformational year for our business,” Nike CEO John Donahoe said during the company’s earnings call.

The company is trying to revive sales growth in what has been a lackluster year for the stock so far. Morningstar Equity analyst David Schwartz told Yahoo Finance that the sales number was “very weak” and was the main concern from the release.

Nike’s gross margins increased to 44.7% in the fourth quarter, up from 43.6% in the same period a year ago, but came in below analyst expectations of 45.3%.

Shares of the company have fallen more than 17% over the past year, far from the S&P 500’s ( ^GSPC ) 26% gain, as investors grew wary of the retailer’s slowing growth.

“All in all, this longtime industry bellwether continues to struggle admirably, and we believe investors’ patience with management is wearing thin by the day,” Wedbush senior vice president of equity research Tom Nigick wrote in a note following the earnings release. “For a long time, NKE has been one of the most successful growth stories in our coverage and we’ve been waiting for the brand to regain its mojo. But it looks like we’ll have a long wait.”

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Wall Street is closely watching Nike’s product pipeline as the Oregon-based company fends off competition in its core athletic footwear market from rivals like Adidas ( ADDYY ) and On ( ONON ) and Deckers’ ( DECK ) Hoka brand.

Nike executives said they believe their plans to scale new products are “on track” and will impact the company’s financials by the end of the year.

“We plan for meaningful, continuous improvement in the second half and first half, and that starts with the confidence we have around the new products we bring to market,” Nike CFO Matthew Friend said on the earnings call.

Boston, MA - June 25: Toronto Blue Jays 1B Vladimir Gurrero Jr.  Sports red and white Nike shoes.  (Photo by Matthew J. Lee/The Boston Globe via Getty Images)

Will innovation boost Nike’s stock? Toronto Blue Jays 1B Vladimir Guerrero Jr.’s red and white Nike shoes. (Matthew J. Lee/The Boston Globe via Getty Images) (Boston Globe via Getty Images)

Josh Shaffer is a Yahoo Finance reporter. Follow him on X @_joshschafer.

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