Can Nike's stock rise with new innovations? Vladimir Guerrero Jr., first baseman for the Toronto Blue Jays, wears red and white Nike shoes.
Nike (NKE) stock plummeted by 11% in after-hours trading Thursday after the company projected a steeper revenue decline for 2025 than previously anticipated.
The sportswear giant anticipates a mid-single-digit revenue drop for 2025, with a significant 10% decline expected in the first quarter alone. Initially, Nike had forecasted overall sales growth for the year.
This forecast follows Nike's fiscal 2024 fourth-quarter report, released after markets closed on Thursday. The company reported a 2% year-over-year revenue decrease to $12.61 billion, missing Wall Street's estimate of $12.86 billion. However, Nike's earnings per share of $0.99 exceeded analysts' expectations of $0.66. Direct-to-consumer sales fell 8% from the previous year to $5.1 billion.
"Our fiscal [2025] will be a transition year for our business," remarked Nike CEO John Donahoe during the earnings call.
Nike has been striving to revive sales growth amid a challenging year for its stock. Morningstar equity analyst David Swartz commented that the sales figure was disappointing, marking a primary concern from the earnings report.
Despite Nike's gross margins rising to 44.7% in Q4, up from 43.6% a year earlier, the margin still fell short of analysts' 45.3% expectation.
Over the past year, Nike's stock has dropped by more than 17%, contrasting sharply with the S&P 500's 26% gain, as investors have grown wary of slowing growth at the company.
"In summary, this long-standing industry leader continues to face unexpected challenges, and we sense that investor confidence in management is diminishing by the day," noted Tom Nikic, senior vice president of equity research at Wedbush, in a post-earnings note. "Historically, NKE has been one of the most successful growth stories in our sector, but we're waiting longer than expected for the brand to reclaim its former glory."
Wall Street has been closely monitoring Nike's product pipeline as the Oregon-based company competes fiercely in its core athletic footwear market against rivals like Adidas (ADDYY), and newer players such as On (ONON) and Deckers' (DECK) Hoka brand.
Nike executives emphasized their confidence in upcoming product launches and anticipate these initiatives will positively impact the company's financials by the end of the year.
"We expect significant improvement in the second half compared to the first half, starting with the strong launch of new products," explained Nike CFO Matthew Friend during the earnings call.
