Nike Shares Crash Near COVID Lows After Warning Sales Slump Is Worsening

Nike shares are down over 11% after-hours following an ugly earnings picture that saw Q4 revenues disappoint and more notably, a sizable cut in guidance for the first half of this fiscal year.

Building on a slew of reports that suggest pain is finally hitting the consumer’s wallet, Nike’s revenue for Q4 fell 1.7% YoY to $12.61 billion (notably below the $12.86 billion consensus estimate).

• Direct Revenue (via the company’s website, app and stores) $5.1 billion, -7.3% y/y, well below the estimate of $5.68 billion

• Wholesale revenue $7.1 billion, +6% y/y, estimate $6.6 billion

Bloomberg Intelligence analyst Poonam Goyal said the underperformance at Nike’s own sales channels “comes by surprise and is a reason for concern, as the activewear giant could be turning its core shoppers away due to lack of newness.”

She added that the performance in wholesale, which beat estimates, is a “positive indicator for its revived and existing wholesale relationships.”

Geographically, Asia was steady while European revenues fell. North America saw the biggest disappointment to expectations:

• North America revenue $5.28 billion, -1.4% y/y, weaker than the estimated $5.44 billion

• EMEA revenue $3.29 billion, -1.7% y/y, estimate $3.31 billion

• Greater China rev. $1.86 billion, +2.9% y/y, estimate $1.83 billion

• Asia Pacific & Latin America rev. $1.71 billion, +0.5% y/y, estimate $1.74 billion

Across the product-lines, footwear and most notably ‘Chuck Taylor’ brand Converse saw revenues plunge…

• Converse revenue $480 million, -18% y/y, estimate $545.6 million

• Footwear revenue $8.24 billion, -3.6% y/y, estimate $8.64 billion

• Apparel revenue $3.32 billion, +2.8% y/y, estimate $3.25 billion

• Equipment revenue $578 million, +34% y/y, estimate $446.4 million

But then, during the earnings calls, Nike management said that it sees 1Q revenue down about 10% (dramatically worse than the 3% decline consensus had expected).

This comes after Nike said in March that it expected revenue to fall by a low-single-digit percentage in the first half of its fiscal year.

“A comeback at this scale takes time,” Chief Financial Officer Matt Friend said during the company’s call with analysts.

He added the company is transitioning its product lineup to reignite consumer interest. 

NKE shares are trading down almost 12% in the after hours, almost back to COVID lockdown levels…

…almost back to COVID lockdown levels…

Nike Chief Executive Officer John Donahoe is cutting $2 billion in costs and slashing 2% of the workforce, with layoffs recently hitting the company’s European headquarters near Amsterdam and its Boston-based Converse brand.

“We are taking our near-term challenges head-on, while making continued progress in the areas that matter most to NIKE’s future – serving the athlete through performance innovation, moving at the pace of the consumer and growing the complete marketplace,” said John Donahoe, President & CEO, NIKE, Inc.

“I’m confident that our teams are lining up our competitive advantages to create greater impact for our business.”

If Americans can’t afford a new set of sneakers – despite the record number of jobs that Joe Biden has ‘created’, then maybe, just maybe, those jobs weren’t as ‘created’ or ‘well paid’ as some would like you to believe… and maybe, just maybe, the sentiment signals and poll numbers are true about the state of the economy, no matter what all those Nobel laureate economists would prefer that you think.