Nike reported earnings after the closing bell on November 1 ’24, and despite the big EPS beat and better gross margins, the stock fell 10% as investors realized that the turnaround is in it’s infancy and there’s a lot of work to be done.<\/p>\n
Here’s the bad news:<\/strong><\/em><\/p>\n 1.) EPS and revenue estimates were cut sharply after Nike withdrew guidance for fiscal ’25 (ends May ’25);<\/p>\n 2.) 8 quarters ago, the sell-side was expecting Nike to grow 21% in fiscal ’25, but after Tuesday night’s call, consensus EPS estimates are looking for a decline of 28% in EPS this fiscal ‘year ’25;<\/p>\n 3.) Revenue estimate revision now expect a full-year 7% decline in Nike revenue for May ’25;<\/p>\n 4.) The 120 bp y-o-y increase in Nike’s gross margin isn’t expected to continue per the Jefferies analyst;<\/p>\n 5.) On the conference call, management noted worse-than-expected declines in Nike Direct and Nike Digital;<\/p>\n What’s the good news ?<\/strong><\/em><\/p>\n 1.) Despite the seeming lack of visibility Nike is still innovating and saw growth in “multiple sports dimensions” i.e. men’s fitness, men’s global football, and men’s and women’s running footwear. Men’s and women’s running footwear delivered positive growth, a “meaningful improvement” versus the fiscal Q4 ’24 (May ’24) quarter.<\/p>\n 2.) A note out Of Jeffries said that Nike has witnessed a positive reception on it’s Spring running, (from whole sale partners), although that growth has offset other weakness since the Spring ’25 order book “came in roughly flat” (per the Jefferies analyst).<\/p>\n 3) SG&A expenses have declined 7% and 9% y-o-y in the last two quarters although as a percentage of revenue at 24%’ish SG&A looks to be a little high relative to its 21% – 22% range during normal periods.<\/p>\n With the $8 drop in Nike shares, Nike is trading back under 2x revenue, which is much cheaper than where the shares were trading in late ’21 when the stock was trading up at $175 – $180.<\/p>\n