Nike (NKE) stock plunged more than 17% out of the gate Friday after the footwear and apparel giant reported revenue for its fiscal fourth quarter that fell short of estimates and reduced its sales outlook for fiscal 2025.
In the three months ended May 31, Nike's revenue decreased 2% year-over-year to $12.6 billion, which included an 18.1% decline in sales of its Converse brand. The company's earnings per share (EPS), however, rose 53% to $1.01 from the year-ago period.
"We are taking our near-term challenges head-on, while making continued progress in the areas that matter most to Nike's future – serving the athlete through performance innovation, moving at the pace of the consumer and growing the complete marketplace," Nike CEO John Donahoe said in a statement. "I'm confident that our teams are lining up our competitive advantages to create greater impact for our business."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Nike's results were mixed compared to analysts' expectations. According to Yahoo Finance, Wall Street was anticipating revenue of $12.8 billion and earnings of 83 cents per share.
"We are driving better balance across our portfolio," Nike Chief Financial Officer Matthew Friend said in a statement. "While we are encouraged by our progress, our fourth quarter results highlighted challenges that have led us to update our fiscal 2025 outlook."
On Nike's conference call, Friend said the company now anticipates revenue in its new fiscal year to be down mid-single digits, with sales in the first half to be down in the high-single digits. The retailer had previously said it expected sales to grow.
Friend added that Nike anticipates first-quarter revenue "to be down approximately 10%," reflecting "more aggressive actions in managing our classic footwear franchises, continuing challenges on Nike Digital, muted wholesale order books with newness not yet at scale, a softer outlook in greater China, and a number of quarter-specific timing factors."
Is Nike stock a buy, sell or hold?
Even though Nike is one of the worst Dow Jones stocks so far this year, down 33% at last check, Wall Street remains bullish. According to S&P Global Market Intelligence, the average analyst target price for NKE is $102.34, representing implied upside of more than 30% to current levels. Additionally, the consensus recommendation is Buy.
However, these price targets may be revised lower in the days and weeks ahead following the weak earnings release and reduced outlook.
Financial service firm Wedbush was one of the first outfits to revise their price target on the blue chip stock, maintaining its Outperform rating (equivalent to a Buy) but lowering its price target to $97 from $115.
"NKE's fourth-quarter print was very choppy, and the challenges facing the company are clearly more impactful than we (or management) expected," Wedbush analyst Tom Nikic said in a note this morning. "We doubt many investors will view this as a 'buy the pullback' event, and we think NKE shares are headed for a stay in the proverbial penalty box until new product innovations actually start to manifest themselves and management regains investor trust."
Nikic adds that he believes Nike will "eventually 'figure it out,'" but his "conviction thesis has certainly taken a hit.
Wedbush's $97 price target still represents implied upside of over 27% to current levels.
Related Content
-
Average Net Worth by Age: How Do You Measure Up?Financial advisors discuss the secrets to growing your net worth over time.
-
Three Charitable Giving Strategies for High-Net-Worth IndividualsIf you have $1 million or more saved for retirement, these charitable giving strategies can help you give efficiently and save on taxes.
-
Three Charitable Giving Strategies for High-Net-Worth Individuals
If you have $1 million or more saved for retirement, these charitable giving strategies can help you give efficiently and save on taxes.
-
The Wealth-Building Powers of Health Savings Accounts (HSAs)Health savings accounts could be the most underutilized wealth-building tool out there. Here’s who should use them and how to maximize their benefits.
-
Seven Ways to Be an Absolute Jerk as a LawyerHere's what law students need to know about damaging their relationships with other lawyers and judges and running up the bill for clients.
-
Stock Market Today: Stocks Are Positively Mixed to Open DecemberTechnology led the way Monday as two of the three main equity indexes closed higher.
-
The Best Retail Stocks to Buy This Holiday SeasonE-commerce is a growing trend, but most folks still prefer to shop in stores. That makes these dominant retail stocks worth a closer look.
-
One Good Way to Withdraw Retirement Assets (and a Bad One)Don't withdraw retirement assets haphazardly. Managing distributions intentionally can lower your taxes, conserve your wealth and reduce Medicare premiums.
-
What Is Capital Gains Tax Deferral?Spoiler alert: It's the secret weapon of savvy real estate investors. Here's how it works and details about the tools you need to do it.
-
Don't Leave Your Heirs an IRA Tax BombYour traditional IRA has served you well, but when your heirs inherit it, watch out. Consider some of these strategies to minimize their tax burdens.
