Nike (NKE) shares fell about 14% Friday in early premarket trading after the retailer said it expects revenue to fall more than previously expected next year.
The company said Thursday that it expects revenue to decline to single digits in 2025, including an expected 10% decline in the first quarter. Nike had initially targeted overall sales growth in 2025.
The guidance reflects continued trends from Nike’s fiscal 2024 fourth quarter, which the footwear company reported after the closing bell on Thursday. The company said fourth-quarter revenue fell 2% from a year earlier to $12.61 billion, missing Wall Street’s estimate of $12.86 billion. Meanwhile, Nike’s earnings per share of $0.99 beat analysts’ expectations of $0.66. Nike’s direct-to-consumer sales fell 8% from the same quarter a year ago to $5.1 billion.
Finance [2025] “2020 will be a transition year for our business,” Nike CEO John Donahoe said during the company’s earnings call.
The company is trying to revitalize sales growth in what has been a lackluster year for the stock so far. Morningstar equity analyst David Schwartz told Yahoo Finance that the sales number was “very weak” and was the main concern with the release.
Nike’s gross margins rose to 44.7% in the fourth quarter, compared with 43.6% in the year-ago period, but came in below analysts’ expectations of 45.3%.
The company’s stock entered the issue down more than 17% over the past year, a far cry from the S&P 500 (^GSPC)’s 26% gain, as investors grew wary of slowing growth at retailers.
“Overall, this industry leader continues to struggle surprisingly well, and we believe investor patience with management is wearing thin by the day,” Tom Nikic, senior vice president of equity research at Wedbush, wrote in a note following the earnings call. “Over the long term, NKE has been one of the most successful growth stories in our coverage, and we continue to wait for the brand to regain its luster. But it looks like we’ll have to wait a little longer.”
Wall Street is keeping a close eye on Nike’s product pipeline as the Oregon-based company works to fend off competition in the core athletic footwear market from rivals like Adidas (ADDYY) and relative upstarts like On (ONON) and Deckers (DECK)’s Hoka brand.
Nike executives stressed that they believe their plans to expand new product range are on “the right track” and will impact the company’s financials by the end of the year.
“We plan for sequential, meaningful improvement in the second half versus the first half, and that starts with the confidence we have around the new products we bring to market,” Nike CFO Matthew Friend said on the earnings call.
Josh Schaffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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