Nike stock reversed a late-Thursday rally, falling hard Friday morning, after the Dow Jones retailer struggled to clear a low bar for its Q2 2025 results.
Nike earnings fell for the second quarter in a row to 78 per share from $1.03 per share last year. Revenue fell for the third consecutive quarter, sliding 8% to $12.4 billion.
FactSet expected earnings of 63 cents per share on $12.1 billion in revenue.
Nike brand revenues fell 7% to $12 billion, with a 13% decline in Nike Direct revenue to $5 billion. Wholesale revenues eased 3% to $6.9 billion. Sales for Converse tumbled 17% to $429 million.
The retailers gross margin decreased 100 basis points to 43.6%, due to higher discounts and sales channel changes. However, it was partially offset by lower product input costs, as well as lower housing and logistics costs.
Inventories were flat year-over-year at $8 billion.
Nike did not provide an outlook with its earnings release. The Dow Jones retailer in Q1 withdrew its full-year guidance amid its transition to new CEO Elliott Hill.
"After an energizing 60 days of being back with my Nike teammates, our clear priority is to return sport to the center of everything we do," Hill said in the Q2 release. "We're taking immediate action to reposition our business, so we can get back to driving long-term shareholder value."
CFO Matthew Friend added that Nike is "accelerating our pace and reigniting brand momentum through sport," now that the company is under Hill's leadership.
Nike Brand Strategy
Nike during its Q1 report said it expects its men's and women's lifestyle, Jordan brand and Nike Digital businesses to all decline in double digits for fiscal 2025.
The company is also reducing its emphasis on its Air Force 1, Air Jordan 1 and Dunk franchises. The retailer expects sales deceleration for those lines to continue as it tightens market supply, which will temper revenue over the coming seasons. Looking ahead, Nike also plans to rebalance product allocations to its highest traffic channels, such as wholesale, to maximize franchise health.
Nike is ramping up product innovation, particularly for running shoes. During the quarter, the Dow retailer saw growth in its men's fitness, men's global football (soccer) and men's and women's running footwear. Nike also noted that its order book for spring 2025 footwear is set to grow double-digits from last year.
Analyst Cut Targets
A half dozen analysts cut their price targets on the stock Friday morning. Citi was among the lonely holdouts. Its note said Nike's decision to inflict "near term pain" in order to clear swollen inventories sets the outfit up for a fiscal 2026 recovery. Citi held its 102 price target and buy rating steady.
Earlier in the week, Nike received a number of price target cuts at the beginning of the week, based on worsening sales trends over the past three months as the retailer pursues turnaround efforts.
Evercore ISI data indicates that Nike decided to leverage holiday traffic and increase markdowns in order to clear its inventory, The Fly reported. The firm lowered its FY 2025 earnings forecast to 2.25 from 2.70, as well as cut estimates for 2026, 2027 and 2028. Evercore lowered its NKE price target to 97 from 105 and kept an outperform rating on the shares.
Telsey Advisory also lowered its Nike price target by 3 to 93. It plans to closely monitor the Q3 guidance and turnaround updates from new CEO Elliott Hill, who took over for John Donahoe in October. However, Telsey noted that Nike's transition period and return to growth could take a few quarters, and the analyst firm doesn't expect a brand turnaround to occur in the next year. Telsey maintained its outperform rating.
Deutsche Bank believes Nike could resume its growth path starting in 2026, based on a deeper inventory, franchise reset and further business investments in the second half of 2025. The firm cut its price target on Nike stock to 82 from 92, but maintained a buy rating on the shares.
Barclays last Wednesday also wrote it expects Nike to miss estimates due to North America weakness, uncertainty in China and "franchise life cycle" management. Meanwhile, inventory levels remain elevated as Nike brand promotions intensify, Barclays added.
Nike Stock
NKE stock had rallied 10% late Thursday. Shares reversed those gains in Friday's remarket session, diving more than 7%.
Nike remains locked into a long-term downtrend, trading below all of its key technical lines and down 29% in 2024 through Thursday's close.
Nike stock has been the second-worst performer in the Dow Jones Industrial Average this year. Boeing leads the stragglers with a nearly 34% decline so far this year.
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