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Nike Earnings: Dim Sales Outlook Slams Shares, but Patient Investors Could Be Rewarded

We expect to reduce our fair value estimate of Nike stock.

A Nike corporate logo hangs on the front of their store in Los Angeles, California.
Securities In This Article
Nike Inc Class B
(NKE)

Key Morningstar Metrics for Nike

What We Thought of Nike’s Earnings

Nike’s NKE shares roughly doubled their year-to-date decline with a 12% tumble in June 27 aftermarket trading, as persistent sales weakness has added uncertainty to the firm’s turnaround. Although the firm warned of a difficult demand environment for sportswear and we lowered our estimates, market conditions are more challenging than expected.

After posting flat sales growth in (May-ended) fiscal 2024, Nike guided to a mid-single-digit-percentage sales decline for fiscal 2025. Given that we projected 1% sales growth, we expect to reduce our fair value estimate of $129 per share by a low-single-digit percentage. Even so, we regard the share price weakness as an opportunity for long-term investors, since the sportswear leader stands to benefit from its planned marketing and product initiatives and the growth of the global market over the next few years.

Nike’s 13.3% EBIT margin in its fiscal 2024 fourth quarter beat our estimate by 80 basis points and led to earnings per share of $0.99, which eclipsed our forecast by $0.11. However, this outperformance was mainly driven by a 9% reduction in overhead expenses and was overshadowed by the quarter’s 2% sales decline, short of our estimate for a minimal (1%) gain. The firm attributed the slow sales to a few areas, including digital (down 10%), lifestyle products, some footwear, and uneven demand in key markets.

Nike brand sales fell 1% in North America (42% of total sales) and 2% in Europe, the Middle East, and Africa (26%), which was shy of our estimates for 1% growth for the former and a 1% decline for the latter. Meanwhile, 3% sales growth in Greater China (15% of total sales) was short of our 7% projection. Nike’s thousands of branded stores there experienced double-digit traffic declines amid a very promotional market, suggesting a return to historical sales growth levels above 10% is unlikely before fiscal 2026. That said, we anticipate a sharp turnaround as the nation’s sportswear market develops.

Nike Stock vs. Morningstar Fair Value Estimate

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

David Swartz

Senior Equity Analyst
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David Swartz is a senior equity analyst, AM Consumer, for Morningstar*. He covers department stores, specialty retailers, and manufacturers and retailers of apparel, footwear, and accessories, such as Nike, Lululemon, Tapestry, and Ulta Beauty.

Before joining Morningstar in 2018, Swartz worked as a money manager and equity analyst for a family office in the Seattle area. Prior to that position, he worked for a financial software firm and as an analyst and fund manager for three equity hedge funds in the San Francisco Bay Area.

Swartz holds a bachelor’s degree in economics from the University of California at Berkeley and a master’s degree in economics from Yale University. He also holds a certificate in finance (investment management specialization) from UC Berkeley Extension.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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