Nike (NKE) stock took a significant hit, dropping as much as 11% in after-hours trading on Thursday. This decline followed the company’s announcement that it anticipates a more substantial revenue drop in 2025 than previously expected.
Key Takeaways
- Nike projects a mid-single-digit revenue decline in 2025, with a 10% drop in the first quarter.
- Fourth-quarter revenue fell 2% to $12.61 billion, missing Wall Street estimates.
- Direct-to-consumer sales decreased by 8% to $5.1 billion.
- Gross margins increased to 44.7%, but still fell short of analyst expectations.
- Nike’s stock has declined over 17% in the past year, underperforming the S&P 500’s 26% gain.
Revenue Projections and Market Reaction
Nike’s revised guidance for 2025 indicates a mid-single-digit revenue decline, including a 10% drop in the first quarter. This is a stark contrast to the company’s initial forecast of overall sales growth for the year. The announcement has raised concerns among investors, leading to a significant drop in the company’s stock price.
Fourth-Quarter Performance
In the fiscal fourth quarter of 2024, Nike reported a 2% decline in revenue, bringing in $12.61 billion. This figure fell short of Wall Street’s expectations of $12.86 billion. Despite the revenue miss, Nike’s earnings per share (EPS) exceeded analyst predictions, coming in at $0.99 compared to the expected $0.66.
Direct-to-Consumer Sales and Gross Margins
Nike’s direct-to-consumer sales also saw a decline, dropping 8% from the same quarter a year ago to $5.1 billion. On a positive note, the company’s gross margins increased to 44.7%, up from 43.6% in the previous year. However, this was still below the analyst expectations of 45.3%.
Investor Sentiment and Competitive Landscape
The company’s stock has been underperforming, with a decline of over 17% in the past year, compared to the S&P 500’s 26% gain. This has led to growing impatience among investors, as highlighted by Wedbush senior vice president of equity research, Tom Nikic. He noted that while Nike has historically been a strong growth story, the current struggles are testing investor patience.
Future Outlook and Product Pipeline
Despite the challenges, Nike executives remain optimistic about the future. They believe that their plans to scale new products are on track and will positively impact the company’s financials by the end of the year. Nike CFO Matthew Friend expressed confidence in the company’s new product lineup, anticipating meaningful improvement in the second half of the year.
As Nike navigates a competitive landscape with rivals like Adidas and emerging brands such as On and Hoka, the company’s ability to innovate and capture market share will be crucial in reversing its current downward trend.