Nike stock dived Friday after the Dow Jones retailer missed sales forecasts for its Q4 results late Thursday and cut its outlook. A number of analysts downgraded Nike and/or cut their price target on shares after results.
Nike earnings accelerated for the fourth quarter in a row. The Dow Jones retailer reported a 50% increase in Q4 earnings to 99 cents per share. Revenue dipped 2% to $12.6 billion after sales growth slowed the last five quarters. Excluding restructuring charges, Nike earnings were $1.01 per share for the quarter.
FactSet expected earnings to increase 27% to 84 cents per share on a slight uptick in revenue to $12.86 billion.
Nike brand sales eased 1% to $12.1 billion while Converse revenue dropped 18% to $480 million. Nike brand footwear sales declined 4% for the quarter but apparel sales rose 3%. Equipment sales rose 34% in Q4.
Nike Direct revenue fell 8% to $5.1 billion, driven by a 10% decline in Nike brand digital sales and a 2% decrease in Nike-owned stores.
Wholesale revenue rose 5% to $7.1 billion. Meanwhile, the company's gross margin increased 110 basis points to 44.7%, driven by strategic pricing actions, lower freight rates and logistics costs, as well as lower warehousing expenses. The margin growth was partially offset by lower margins in Nike Direct and unfavorable changes to exchange rates.
Full-year earnings increased 15% to $3.73 per share, just ahead of estimates for $3.70 per share. Nike's 2024 revenue was essentially flat at $51.36 billion, and fell short of forecasts for a small bump to $51.63 billion.
Nike Cuts Outlook
Executives during the earnings call said they expect 2025 revenue to be down in the mid-single-digits, with the first half of the year down by high single digits. Nike previously guided a low single-digit sales decline for the first half of the year.
The company estimates a 10% drop in Q1 revenue, driven by a softer outlook in China, challenges to Nike Digital, muted wholesale order books, and aggressive actions to manage its classic footwear franchises.
FactSet analysts forecast Nike Q1 earnings fall 34% on a 7.9% revenue decline to $11.91 billion.
Analyst Reactions
UBS early Friday downgraded Nike to neutral from buy and slashed its price target on Nike stock to 78 from 125, The Fly reported. The retailer's Q4 report indicated that its fundamental trends are "much worse than expected," the firm wrote in a research note. UBS said the key takeaway from the report is there "will be no quick rebound" for Nike earnings and the company is embarking on a "multiyear reset" to return to healthy sales growth. UBS forecasts Nike achieves annual earnings growth of 3% over the next five years, compared to previous estimates of 13% growth.
JPMorgan also downgraded Nike to neutral, Stifel lowered its rating to hold and Morgan Stanley cut shares to an equal weight rating.
Citi, Baird and TD Cowen were among the firms that slashed their price targets on Nike stock. TD Cowen also pointed to emerging competitors in footwear and apparel.
Nike Stock
Nike stock tumbled 20% Friday to undercut its April lows and fall to its lowest level since March 2020.
The stock has been among the worst performers in the Dow this year, trading down 30.6% so far this year.
The company's Q2 forecast provided a soft sales outlook and the retailer announced a cost-savings plan to streamline the business. Executives during the company's Q3 call said they plan to lean into wholesale and retail channels, and pivot focus from its Nike direct and e-commerce channels.
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