Nike Inc. (NYSE:NKE) saw its stock plunge nearly 14% in early premarket trading on Friday after the retailer announced it expects a more significant revenue decline in the coming year than initially projected. The company revised its guidance on Thursday, anticipating a mid-single-digit revenue drop for 2025, including a 10% decrease in the first quarter. This revision contrasts with its earlier forecast for overall sales growth in 2025.
Nike Projects Sales Decline Amid Tough Market Conditions
Nike’s latest guidance follows a disappointing fiscal 2024 fourth quarter, where the company’s revenue fell 2% from the previous year to $12.61 billion, missing Wall Street’s expectations of $12.86 billion. Despite the revenue shortfall, Nike reported earnings per share of $0.99, surpassing analysts’ predictions of $0.66. However, the company’s direct-to-consumer sales dropped 8% from the same quarter last year, totaling $5.1 billion.
“Fiscal [2025] will be a transition year for our business,” said Nike CEO John Donahoe during the earnings call.
Nike has struggled to reignite sales growth this year. David Swartz, an equity analyst at Morningstar, described the sales figures as “pretty weak,” highlighting the main concern from the earnings release. Although Nike’s gross margins increased to 44.7% in the fourth quarter from 43.6% a year ago, they still fell short of analyst expectations of 45.3%.
Investor Concerns and Market Reactions
Nike’s stock has declined over 17% in the past year, a stark contrast to the S&P 500’s 26% gain, reflecting investor anxiety about the company’s slowing growth. Wedbush senior vice president of equity research, Tom Nikic, noted, “All in, this longtime industry bellwether continues to surprisingly struggle, and we believe that investor patience with management is getting thinner by the day.” He added that while Nike has been one of the most successful growth stories, it appears investors will need to wait longer for the brand to regain its momentum.
Competitive Pressures in the Athletic Footwear Market
Nike faces stiff competition in its core athletic footwear market from rivals such as Adidas, On Holding AG (NYSE:ONON), and Deckers Brands(NYSE:DECK), Hoka brand. Wall Street is closely monitoring Nike’s product pipeline as the Oregon-based company strives to fend off these competitors.
Nike executives emphasized their confidence in the company’s plans to scale new products, expecting these efforts to impact financial results by the end of the year. “We are planning for meaningful, sequential improvement in the second half versus the first half, and it starts with the confidence that we have around the new products that we’re bringing to market,” said Nike CFO Matthew Friend during the earnings call.
Nike’s Path Forward: Scaling New Products and Market Repositioning
Despite current challenges, Nike remains optimistic about its future. The company is focusing on introducing innovative products to regain its market position. Investors and analysts will be watching closely to see if Nike can deliver on its promises and achieve the anticipated turnaround.
Featured Image: Unsplash © takeshi2
