Nike, Inc. (NKE)

Nike Inc (NKE) stock dropped by 6.90% due to slowing sales in China during its holiday quarter, despite beating estimates on the top and bottom line but for net income, which is below estimate.

• Quarter's results: The company reported earnings per share of 77 cents, higher than the expected 74 cents, and revenue of $12.43 billion, surpassing the expected $12.28 billion. However, its net income for the period ending Feb. 29 was $1.17 billion, or 77 cents per share, down from $1.24 billion, or 79 cents per share, a year earlier, excluding restructuring charges.
• Regional Sales Performance: In North America, Nike saw a 3% sales increase to $5.07 billion, beating estimates of $4.75 billion. However, sales in China reached $2.08 billion, slightly below the $2.09 billion analysts had expected. In Europe, the Middle East, and Africa, revenue fell 3% to $3.14 billion, worse than the expected $3.17 billion. Sales in Asia Pacific and Latin America rose 3% to $1.65 billion, below the expected $1.69 billion.
• Future Outlook and Strategies: Nike shares initially rose 5% but later dropped by as much as 7% after releasing its guidance for the current quarter and fiscal 2025. The company expects revenue to grow by 1% for fiscal 2024, in line with expectations, and anticipates gross margins to grow 1.6 to 1.8 percentage points, helped by various factors including strategic price increases and improved supply chain efficiency. For fiscal 2025, Nike expects revenue and earnings growth but did not provide specific figures.
• Cost-Cutting Measures and Product Focus: Nike has been focused on cutting costs and becoming more efficient to drive profits and protect margins. The company announced a restructuring plan to reduce costs by about $2 billion over three years and shed 2% of its workforce. It is also investing in growth areas like running, the women's category, and the Jordan brand. Despite challenges, Nike remains a market leader, though some analysts believe its assortment has lost focus and it has fallen behind on innovation, losing market share to competitors.

Nike, Inc. (NKE) dropped stock by 11.83% due to mixed financial results, as Nike posted better-than-expected earnings but fell short of sales expectations.

• Struggles in the Chinese Market: Nike's sales for the second fiscal quarter exhibited a meager 0.5% year-over-year growth, reaching $13.39 billion. This figure fell slightly short of the consensus estimate of $13.46 billion. The key factor behind this revenue miss was the ongoing sluggishness in the Chinese market, where Nike reported a revenue increase of just 4.2%, totaling $1.86 billion. This Chinese revenue figure missed the average analyst estimate by over $100 million.
• Mixed Performance in Different Regions: While North America, Nike's largest sales region, experienced a 3.5% year-over-year decline, it was in line with analyst expectations. EMEA (Europe, Middle East, and Africa) revenue also disappointed, coming in at $3.57 billion compared to the expected $3.66 billion. However, Asia Pacific & Latin America sales saw a substantial increase of 13% to $1.81 billion, surpassing Street's expectations of $1.66 billion.
• Revenue Composition and Positive Inventory News: Notably, Nike derives approximately 60% of its revenue from footwear sales. For the second quarter, Nike reported $8.61 billion in sales, slightly below the anticipated $8.69 billion. However, apparel revenue aligned with expectations. An encouraging aspect was the 14% year-over-year drop in inventory, which amounted to $7.98 billion, showcasing improved efficiency.