Nike Shares Slump 20% on 2025 Guidance Miss, Softer Sales Outlook in China

TMTPost -- Nike, Inc.’s shares slumped 20% on Friday. The sportswear and sneaker giant suffered its biggest daily loss on record after it issued worse-than-expected revenue guidance for the coming year and warned on softer sales outlook in China.

Credit：Nike

Nike posted revenue of $12.6 billion for the fiscal fourth quarter ended May 31, 2024, down 2% year-over-year (YoY) on a reported basis, while Wall Street estimated revenue rose marginally YoY to $12.86 billion. The revenue was dragged down by Nike’s direct revenues of $5.1 billion, with a YoY 8% decline. In comparison, wholesale revenues that quarter were $7.1 billion, up 5% YoY.

Nike’s diluted earnings per share for the fourth quarter was $0.99, better than analysts’expectation of $0.66. Gross margin that quarter increased 1.1 percentage points to 44.7%, , primarily due to strategic pricing actions, lower ocean freight rates and logistics costs, and lower warehousing, partially offset by lower margin in NIKE Direct and unfavorable changes in net foreign currency exchange rates.

For the full fiscal 2024 year, Nike generated $51.4 billion, slightly more than revenue of $51.2 in the previous year. That is the slowest annual growth for the company since 2010, excluding the Covid-19 pandemic period. Gross margin for the fiscal 2024 climbed 1.1 percentage points to 44.6%. Nike attributed it to strategic pricing actions and lower ocean freight rates and logistics costs, partially offset by higher product input costs, lower margin in NIKE Direct and unfavorable changes in net foreign currency exchange rates.

At an earnings call, Nike reported further revenue decline forecast. The company expected revenue for the current quarter to drop 10% YoY, compared with analysts’estimated declined of around 3%. It also cut its guidance for the fiscal 2025 year. It now projects that year will see a mid-single-digit decline in sales, while its previous forecast was a positive growth. The new guidance suggested Nike faces more challenges to reverse its downturn than analysts anticipated. They estimated a 0.9% rise in annual revenue. The company also expected sales in the first half of the fiscal year to fall in the high single digits, whereas its previous guidance of the period is decline in the low single digits.

“While we are encouraged by our progress, our fourth quarter results highlighted challenges that have led us to update our Fiscal '25 outlook,”said Matthew Friend, the Chief Financial Officer (CFO) of Nike, at a statement on Thursday. “A comeback at this scale takes time.Although the next few quarters will be challenging, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive sustainable, profitable, long-term growth,” the finance chief then told said analysts at an earnings conference.

Friend noted headwinds including those from China. He said Nike cut its guidance as it contends with slower online sales, planned declines in classic footwear franchises, “increased macro uncertainty” in the Greater China region and “uneven consumer trends” across Nike’s markets. “We’ve been navigating several headwinds which we now expect to have a more pronounced impact on fiscal 25,” Friend said. Besides a softer consumer outlook in China, the company sales will also take a hit from weaker-than-expected online sales for its lifestyle business and slower sales of wholesalers to be slower as it scales new innovations and pulls back on classic franchises.