Nike (NKE) stock experienced a significant decline of up to 17% on Friday, following the company's announcement of a larger-than-anticipated revenue decline projection for 2025. This news came as a disappointment to investors, as Nike had previously guided for overall sales growth in 2025.
- In 2025, the company projects a mid-single-digit revenue decrease, including a predicted 10% decline in the first quarter.
- Revenue in the fourth quarter dropped 2% year over year to $12.61 billion, falling short of Wall Street's expectations of $12.86 billion.
- The company's direct-to-consumer sales declined by 8% year over year to $5.1 billion.
Reasons for the Downturn
Nike has been working to reignite sales growth, but the fiscal year 2024 has been lackluster for the stock. Analysts believe that the weak sales numbers contributed to the stock's decline.
- Nike's gross margins increased to 44.7% in the fourth quarter, up from 43.6% a year ago, but fell short of analyst forecasts of 45.3%.
- Over the past year, the company's stock has lost more than 17%, significantly lagging behind the S&P 500's (^GSPC) 26% growth, as investors fret over the slowdown in the retailer's expansion.
- Nike faces growing competition in the athletic footwear market from Adidas (ADDYY) and emerging brands like On (ONON) and Deckers' (DECK) Hoka brand.
Future Outlook
Nike executives expressed confidence in their plans to scale up new products, expecting them to positively impact the company's financial performance by year's end.
- The company anticipates a marked sequential improvement in the second half compared to the first, driven by confidence in the new products being introduced.
- Nike is focusing on product pipeline development to maintain a competitive edge in the athletic footwear sector.
- Investors and analysts will continue to monitor Nike's performance closely, particularly the impact of new product introductions and the competitive landscape.
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