Nike shares fell early Friday after the Dow Jones retailer missed sales forecasts for its Q4 results Thursday night and cut its outlook. A number of analysts downgraded Nike and/or lowered their price targets for the stock following the results.
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Nike (NKE) earnings accelerated for the fourth quarter in a row. The Dow Jones retailer reported a 50% increase in Q4 earnings to 99 cents per share. Revenue fell 2% to $12.6 billion after sales growth slowed over the last five quarters. Excluding restructuring costs, Nike’s earnings were $1.01 per share for the quarter.
FactSet expected earnings to rise 27% to 84 cents per share, on modest revenue growth to $12.86 billion.
Nike brand sales fell 1% to $12.1 billion, while Converse revenue fell 18% to $480 million. Sales of Nike brand footwear fell 4% for the quarter, but apparel sales rose 3%. Equipment sales rose 34% in Q4.
Nike Direct revenue fell 8% to $5.1 billion, due to a 10% decline in Nike brand digital sales and a 2% decline in Nike stores.
Wholesale revenue rose 5% to $7.1 billion. Meanwhile, the company’s gross margin increased 110 basis points to 44.7%, thanks to strategic pricing promotions, lower freight rates and logistics costs, as well as lower storage costs. Margin growth was partially offset by lower margins at Nike Direct and unfavorable currency movements.
Full-year earnings rose 15% to $3.73 per share, just above estimates of $3.70 per share. Nike’s 2024 revenue was essentially flat at $51.36 billion, missing forecasts for a small increase to $51.63 billion.
Nike lowers outlook
Executives said during the earnings call that they expect revenue to decline by mid-single digits in 2025, with the first half of the year declining by high single digits. Nike previously forecast a low single-digit revenue decline for the first half of the year.
The company estimates a 10% sales decline in the first quarter, driven by a softer outlook in China, challenges for Nike Digital, muted wholesale order books and aggressive moves to manage its classic footwear franchises.
FactSet analysts predict Nike’s first-quarter profits will fall 34% on sales down 7.9% to $11.91 billion.
Analysts’ comments
UBS downgraded Nike to neutral from buy on Friday morning and lowered its price target for Nike shares from 125 to 78, The Fly reported. The retailer’s Q4 report indicated that fundamental trends are “much worse than expected,” the company wrote in a research note. UBS said the key takeaway from the report is that there will be “no quick rebound” for Nike’s profits and that the company is undergoing a “multi-year reset” to return to healthy sales growth. UBS predicts Nike will achieve annual earnings growth of 3% over the next five years, compared to previous estimates of 13% growth.
JPMorgan also downgraded Nike to neutral, Stifel downgraded its rating to hold and Morgan Stanley downgraded the stock to an equal-weight rating.
Citi, Baird and TD Cowen were among firms that cut their price targets for Nike shares. TD Cowen also pointed to emerging competitors in footwear and apparel.
Nike stocks
Shares of Nike fell 19.4% on Friday morning, undermining April lows. The stock market opened at the lowest level since April 2020.
The stock has been among the worst performers in the Dow Jones this year, falling 13.3% so far this year through Thursday’s close.
The company’s Q2 forecast gave a soft sales outlook and the retailer announced a cost-cutting plan to streamline the business. During the company’s Q3 call, executives said they plan to focus on wholesale and retail channels and shift focus away from Nike direct and e-commerce channels.
