Nike's Stock Declines Following Major Sales Drop, Guidance Withdrawal, and Investor Day Postponement
Nike shares took a hit in premarket trading in New York after the company announced the withdrawal of its full-year sales guidance and the postponement of its investor day, originally scheduled for November. This comes as a new leadership team is set to take over in less than two weeks.
In September, CEO John Donahoe announced that Elliott Hill, a Nike veteran, would be taking over as CEO on October 14. With this leadership change imminent, the company has withdrawn its full-year guidance and will instead provide quarterly updates for the rest of the year.
Changes in Leadership and Strategy
CFO Matthew Friend explained the decision during an earnings call, stating that this move would give Hill the flexibility to reconnect with employees and teams, evaluate current strategies and business trends, and develop plans to best position the business for fiscal 2026 and beyond.
Friend also revealed that Nike plans to adopt a new strategy to increase its market share in running shoes and clothes. He acknowledged that Nike has lost market share in the running specialty channel over the past four years due to a decrease in engagement with that channel. The company now plans to reinvest in these channels to change the trajectory of the business.
Analysts' Insight
A team of Goldman analysts, led by Brooke Roach and Evan Dorschner, provided further insight into Nike's decision to withdraw its full-year sales guidance. They noted that the company's expectations for revenue have softened since the start of the year due to challenging digital traffic trends, pressured retail sales trends across the industry, and Spring 2025 order books coming in slightly below expectations.
The analysts also noted that Nike's commentary was weaker than expectations for both the second quarter and the year, and they expect the stock to underperform peers as a result.
First-Quarter Earnings
Nike's first-quarter earnings showed earnings per share of 70 cents, higher than the GS/FactSet consensus of 51 cents/ 52 cents. However, sales were down 10% compared with the same period last year.
Analysts' Commentary
Several analysts provided additional commentary on Nike's performance. BMO Capital Markets analyst Simeon Siegel noted that Nike's margin-driven profit beat offset the soft first-quarter sales. Truist Securities analyst Joseph Civello expressed caution on near-term turnaround opportunities, given the lighter wholesale order books for next Spring. Piper Sandler analyst Anna Andreeva deemed the company's move to pull the annual guide and postpone its Investor Day as "prudent."
Goldman Analysts Rate Nike as a "Buy"
Despite the challenges, Goldman analysts rate Nike as a "Buy" for clients. They lowered their estimates and price target to reflect weaker margins and a slower pace of recovery in sales and profits. However, they see a path to stronger results ahead, as they expect fiscal 2025 to mark a low point in sales and profitability.
Downside Risks
The analysts also highlighted key downside risks, including a China macro slowdown, an intensification of sportswear market competitive intensity, wholesale channel pressures, inventory management and promotionality, and slower recapture of transitory margin pressures.
Bottom Line
The cancellation of the investor day next month is not a favorable development for the world's largest sportswear company. It seems that Nike is going through a challenging transition period, with changes in leadership and strategy, and a significant drop in sales. It's clear that the company has some hurdles to overcome, but the question is, can they successfully navigate these challenges and regain their footing in the market? What are your thoughts on this? Share this article with your friends and let us know your views. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
Nike's Stock Declines Following Major Sales Drop, Guidance Withdrawal, and Investor Day Postponement
Nike shares took a hit in premarket trading in New York after the company announced the withdrawal of its full-year sales guidance and the postponement of its investor day, originally scheduled for November. This comes as a new leadership team is set to take over in less than two weeks.
In September, CEO John Donahoe announced that Elliott Hill, a Nike veteran, would be taking over as CEO on October 14. With this leadership change imminent, the company has withdrawn its full-year guidance and will instead provide quarterly updates for the rest of the year.
