Sneaker maker Nike, Inc. (NYSE: NKE) has delivered mixed financial performance after adopting the new business model of selling directly to customers and cutting ties with third-party retailers. The market will be keeping a close watch on the company’s first-quarter earnings, which is expected to come on Thursday after the bell.
In late June, Nike’s stock suffered one of the biggest one-day losses after the management issued weak sales guidance. The stock is showing signs of a rebound, but the relatively high valuation is a dampener as far as investing is concerned. Meanwhile, its long-term prospects look intact because Nike still dominates the sportswear market. Also, it is expected that under the new leadership, the company will regain its lost strength.
Q1 Report Due
When the Beaverton-based sportswear behemoth reports its August-quarter results, the market will be looking for earnings per share of $0.52, which represents a sharp decline from the $0.94 the company earned in the corresponding period of 2024. The consensus revenue estimate for Q1 is $11.65 billion, compared to $12.9 billion in the year-ago quarter. The report is slated for release on Tuesday, October 1, at 4:15 pm ET.
Earlier, the Nike leadership had warned of a 10% fall in first-quarter revenue, mainly reflecting the continued slowdown in NIKE Digital, weak wholesale order books, and muted sales in Greater China. The guidance aligns with the general perception that the demand for Nike products has been sliding lately due to a lack of innovation.
For the fourth quarter, Nike reported net income of $1.50 billion or $0.99 per share, compared to $1.03 billion or $0.66 per share in Q4 2023. Earnings beat estimates for the fourth consecutive quarter. Meanwhile, revenues decreased to $12.61 billion in the May quarter from $12.82 billion in the prior-year period and missed the Street view. A 4% decrease in the core footwear segment more than offset higher apparel and equipment sales. NIKE Direct revenues came in at $5.1 billion during the three months.
Leadership Change
Last week, the company announced the retirement of CEO John Donahoe who often faced criticism for the weak sales performance. Donahoe will be replaced by Elliott Hill, who served the company for more than three decades before retiring in 2020. The market responded positively to the news, and the stock made strong gains. The new CEO has the challenging task of dealing with stiff competition and regaining the market share lost due to the shift to direct-to-customer sales, a process that is expected to take a long time.
Commenting on the Q4 results, John Donahoe said a few months ago, “We’re sharpening our focus on sport, accelerating our pace and scaling of newness and innovation, driving bigger, bolder storytelling, and elevating the entire marketplace to fuel brand distinction and being the path of the consumer. This is our playbook, and we’re seeing momentum build in all four areas, particularly on the performance side of our product portfolio. We have work to do, but we’re on it. Our teams are moving with energy and urgency against the opportunity we see in front of us.”
On Tuesday, Nike’s stock opened at $86.20 and maintained an uptrend early in the session. For more than three months, it has been trading below the 12-month average of $95.10.