Nike Inc NKE shares continued their slide on Monday, falling 8% since the company's first-quarter earnings report released last week.
Investors are reacting negatively to the earnings miss on revenue, sluggish global sales and the company's decision to withdraw its full-year guidance.
What Happened: Despite beating on earnings — reporting 70 cents per share versus an expected 52 cents — Nike’s revenue of $11.59 billion came in just short of the $11.65 billion Wall Street had anticipated. This was compounded by a worrying 10% year-over-year decline in total revenues, driven by sharp sales drops in several key markets.
North American sales, Nike’s largest and most crucial region, plummeted by 11%, while Greater China, which had been a major growth driver in previous years, saw a 4% decline. European sales dropped 13%, and Asia Pacific and Latin American revenues fell 7%, signaling widespread demand weakness across the globe.
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Nike's disappointing performance wasn't limited to geography. Its Direct-to-Consumer (DTC) channel, which has been a cornerstone of its digital strategy, saw revenues fall by 13%, while its core Nike Brand revenues were down 10%. Wholesale revenues also slumped 8%, reflecting broader struggles in both digital and traditional retail channels.
These declines hint at deeper issues with consumer demand and competition, particularly as the brand faces mounting pressure from rivals like Adidas, Puma and a host of emerging sportswear companies.
What Else: Adding to the market's concerns was Nike's decision to withdraw its full-year guidance, a move that often signals uncertainty about future performance. CFO Matthew Friend, in an earnings call following the report, revealed the company now expects second-quarter revenues to decline between 8% and 10%, and gross margins to fall compared to last year. He pointed to ongoing weakness in Nike Digital traffic and sluggish retail sales as contributing factors.
Friend also highlighted the company’s plan to roll out new products and innovations later this year in a bid to revive revenue, but with the global consumer environment softening and inflation eating into disposable incomes, the road ahead remains challenging.
The uncertainty surrounding Nike's leadership transition is further weighing on the stock. John Donahoe, the outgoing CEO, will step down on October 14, with veteran executive Elliott Hill taking over the top role. While Hill’s extensive history with the company is reassuring to some, the stock market typically views such transitions cautiously, especially in uncertain times.
Nike's upcoming Investor Day, which will take place after Hill's official appointment, is now seen as a crucial moment for the company to provide more clarity on its strategic direction and how it plans to recover from these setbacks.
Is NKE A Good Stock To Buy?
An investor can make a few decisions when deciding whether a stock is a good buy. In addition to valuation metrics and price action which you can find on Benzinga's quote pages – like Nike‘s page for example – there are factors like whether or not a company pays a dividend or buys a large portion of its stock each quarter.
These are known as capital allocation programs. Nike does pay a dividend, which yields 1.62% per year as of the closing price on Oct. 7, 2024. Feel free to search Benzinga's dividend calendar for the next company that is due to pay a dividend and determine what kind of yield you can earn for holding a share of the company.
For example, if you're looking to earn an annualized return of 12.05%, you'll need to buy a share of Nuveen Core Plus Impact by the Oct. 15, 2024. Once done, you can expect to receive a nominal payout of $0.12 on Nov. 1, 2024.
Buyback programs are obviously different and highly variable. A company can approve a buyback program and purchase shares as it sees fit over the course of time in which the buyback was authorized. Looking through the latest news on Nike will often yield whether or not the company has approved a buyback program recently. Buyback programs usually serve as a support for share prices, serving as a backstop for demand.
According to data from Benzinga Pro, NKE has a 52-week high of $123.39 and a 52-week low of $70.75.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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