Nike shares fell significantly following the company’s recent earnings call. Nike had an unexpected forecast of a sales decline for fiscal 2025, causing a substantial year-to-date stock drop of about 30%. The company faces widespread problems across its business lines and geographies. Nike shares are down approximately 10% over the past five years.
In its fiscal 2024 fourth quarter, Nike reported a 2% year-over-year sales decline to $12.6 billion. Nike brand revenue dropped 1% to $12.1 billion, while Converse sales plunged 18% to $480 million (FrontOfficeSports). Direct revenue decreased 8% to $5.1 billion, whereas wholesale revenue rose 5% to $7.1 billion. Despite these challenges, Nike’s gross margin increased to 44.7%, aided by lower ocean freight costs and pricing changes. Additionally, operating expenses were reduced, with SG&A costs falling 7%, leading to a 50% increase in earnings per share (EPS) to $0.99.
Investors were shocked by Nike’s guidance for fiscal 2025. The company expects sales to decline by about 5%, contrary to previous statements that anticipated growth (MotleyFool). Almost every segment across Nike is experiencing issues spread across multiple geographies. The company is dealing with currency issues, underperformance in its digital business, and a weakened sales outlook in China. As a result, analysts predict a prolonged recovery period for Nike. Some investors say its valuation, with a forward P/E ratio of 24, is high for a company undergoing shrinkage.
Nike is striving to recover from its worst single-day stock market performance, with shares plunging 20% and $28 billion. Two subsequent trading days have been far less volatile, with a 1.9% gain on Monday countered by a 1% fall on Tuesday. However, Nike shares remain at their lowest level since the COVID-19 pandemic in 2020.
To address rising consumer concerns about price increases, Nike plans to introduce a new lineup of less-expensive shoes priced below $100. This initiative aims to attract more price-sensitive consumers amid stiff competition from brands like Hoka and On.
Nike plans to roll out new sneakers priced at $100 and under to regain sales momentum (FastCompany). This move comes as Nike battles increased competition and consumer spending caution. Nike’s top-end Air Jordan 1 sneakers have seen significant price hikes, currently selling for up to $200, while rival brands like Adidas offer popular models at more affordable prices. Analysts warn that while this approach might attract more budget-minded shoppers, it may not fully address broader issues such as the need for innovation.
Nike will continue to leverage its massive brand value and worldwide presence while expanding its presence. Currently, investors are remaining cautious in valuing the company and its future growth prospects. Nike is under strong pressure from shareholders to continue to develop and improve its bottom line.
Nike’s recent stock plunge reflects broader industry challenges such as shifting consumer preferences, economic uncertainties, and fierce competition from brands like Adidas, Hoka, and On. Nike’s strategic responses, including cost management and market-specific strategies, highlight the broader industry trends toward affordability, sustainability, and digital transformation. The company’s performance amid these challenges will be critical for its recovery and will indicate the overall health of the athletic clothing and footwear market.
