Shares of Nike (NYSE:NKE) are plunging lower by 20% after the footwear and apparel giant reported a disappointing fiscal 2024 fourth-quarter earnings amid rising competition. NKE stock is set to have its largest one-day decline since 2001.
During the quarter, revenue fell by 2% year-over-year to $12.6 billion, falling short of the analyst estimate for $12.86 billion. Of the revenue, $7.1 billion was attributed to wholesale, which rose by 5%. Direct-to-consumer (DTC) revenue fell by 8% to $5.1 billion.
The company’s adjusted EPS of $1.01 beat the analyst estimate for 84 cents, although that isn’t helping its case today.
Nike’s guidance for fiscal year 2025 was a major letdown, as it now expects sales to fall by “mid-single digits” after guiding for growth during its previous earnings.
“We are managing a product cycle transition with complexity amplified by shifting channel mix dynamics (and) a comeback at this scale takes time,” said CFO Matthew Friend.
NKE Stock Plunges 20% Following Earnings
While Nike is still a leader in the footwear industry, competition is quickly catching up. Competitors like On (NYSE:ONON) and Decker’s (NYSE:DECK) HOKA are taking a bite out of Nike’s market share with new designs and innovations.
Nike is also taking a hit from its DTC approach. The company previously stated that the DTC profit from its website and brick-and-mortar locations is more than 2x the profit compared to selling through a wholesaler. That resulted in Nike reducing the number of its wholesale partners, although the company is now backtracking following a decline in DTC sales.
“Nike took it too far and underestimated the importance of third-party retailers. This withdrawal opened the door for those retailers to partner more closely with other brands,” said GlobalData Retail analyst Neil Saunders.
Inflation has also affected consumer sentiment. Many consumers are now favoring experiences, like concerts and travel, over discretionary products.
Following earnings, several analysts slashed their price targets on NKE. TD Cowen’s John Kernan lowered his target to $75 from $89, citing increased competition and expectations for lower growth in the future. HSBC’s Erwan Rambourg lowered his target to $90 from $100, adding that the footwear industry’s barriers to entry have fallen much lower.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
