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."
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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.
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