Nike (NKE) faced a significant downturn in early pre-market trading on Friday, plummeting nearly 14%. This sharp decline followed the company’s sobering announcement regarding its revenue outlook for the upcoming year.
In its latest update, Nike projected a mid-single-digit decline in revenue for fiscal 2025, marking a stark reversal from earlier expectations of growth. Particularly alarming was the anticipated 10% drop in revenue forecasted for the first quarter of the fiscal year.
The guidance reflects ongoing challenges highlighted in Nike’s fiscal 2024 fourth-quarter report, released after market close on Thursday. Despite posting earnings per share of $0.99, surpassing analysts’ expectations of $0.66, the company reported a 2% year-over-year decline in quarterly revenue, amounting to $12.61 billion—below Wall Street’s consensus of $12.86 billion. Direct-to-consumer sales also faltered, falling 8% to $5.1 billion compared to the same period last year.
During the earnings call, Nike CEO John Donahoe acknowledged that fiscal 2025 would be a transitional year for the company as it seeks to reinvigorate sales growth amid challenging market conditions.
While Nike’s gross margins improved to 44.7% in the fourth quarter, up from 43.6% a year earlier, this figure fell short of analyst projections of 45.3%. The stock has endured a tumultuous year, losing over 17% of its value, starkly contrasting with the S&P 500’s robust 26% gain, as investor confidence waned over slowing growth prospects.
Commenting on the results, Wedbush’s Tom Nikic underscored concerns about Nike’s performance, noting that investor patience with management appears to be wearing thin.
Looking ahead, Nike executives emphasized their confidence in upcoming product launches, which they anticipate will drive meaningful improvement in financial performance by the year’s end.
The market’s scrutiny of Nike’s product strategy remains intense as the company contends with competitive pressures in the athletic footwear market from rivals like Adidas, On, and Deckers’ Hoka brand.
“We are expecting substantial sequential improvement in the second half of the year, driven by the introduction of new products,” affirmed Nike CFO Matthew Friend during the earnings call, underscoring the company’s strategic focus moving forward.
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