The post-earnings slide in Nike’s (NKE) stock isn’t finished yet.
Shares of the athleticwear giant plunged 15.5% to close at $44.62 on April 1, the first trading session following the company’s latest earnings report and guidance. The stock hit an intraday low of $43.17 on April 2.
It’s currently trading at $44.03, bringing the year-to-date drop to 31%. Its market cap stands at a surprising $65 billion, given the company’s vast operations, billions in annual revenue, and cultural relevance.
The stock is down 68% in the past five years, compared to a 62% gain for the S&P 500 (^GSPC).
“Turnaround premium multiple likely to fade,” Evercore ISI analyst Michael Binetti said. “Nike’s efforts to stabilize the P&L through a tougher turnaround (vs. taking more EPS pain upfront in the early stages of the strategy) seem to be prolonging the turnaround beyond what the market is likely to bear.”
The company’s earnings day was littered with red flags.
An obvious one was continued pressure on the all-important China business.
Sales in China fell 10% from the prior year, with digital sales down 21% and wholesale off by 13%.
The other point of contention was guidance.
For Nike’s fiscal fourth quarter (the current quarter), management reported it expects sales down 2% to 4% and gross profit margins down 25 to 75 basis points. Citi analyst Paul Lejuez calculated Nike’s guidance equates to fourth quarter earnings per share guidance of $0.05 to $0.15, below consensus forecasts for $0.20.
Some analysts had earnings per share estimates well above $0.20 for the current quarter, Yahoo Finance data shows.
Analysts have since taken their current quarter earnings per share estimates down to $0.11, just above the midpoint of Nike’s guidance.
What’s more, Nike said at the time that over the next nine months it expects a low-single-digit percentage sales decline and “flattish” earnings.
“Patience is required here … work in progress,” Jefferies analyst Randy Konik wrote in a note.
Investors will now turn their attention to Nike’s fall investorday where hopefully brighter days are pitched.
Said Binetti, “A fall investor day should help realign the incentives and the performance of the turnaround against long-term targets that have been missing for several year. Nike will share its detailed plan for China and showcase innovation at its first headquarters analyst day since 2017.”
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email [email protected].
