Nike Shares Plunge 8% After Missing Revenue Expectations and Withdrawing Full-Year Guidance

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Nike Shares Plunge 8% After Missing Revenue Expectations and Withdrawing Full-Year Guidance

Nike Stock Drops After Q1 Earnings Miss

Nike shares took a hit this week, falling 8% to $82.21 by Friday's close. The decline followed a first-quarter earnings report that missed revenue expectations, sparking concern among investors and leading several analysts to lower their price targets.

While Nike beat earnings expectations, reporting 70 cents per share versus the expected 52 cents, the company missed revenue projections, posting $11.59 billion in sales against estimates of $11.65 billion.

This miss was driven by weak sales across key regions. North America, Nike's largest market, reported an 11% decline, while sales in Greater China fell 4%, Europe saw a 13% drop, and Asia Pacific and Latin America experienced a 7% decline.

These declines reflect persistent challenges, including softer demand, heightened competition, and a slow recovery in consumer spending post-pandemic, particularly in China.

Adding to investor uncertainty, Nike withdrew its full-year guidance, citing slower traffic in Nike Digital and weaker retail sales trends. The company now anticipates second-quarter revenue to decline between 8% and 10%, with gross margins expected to fall versus the prior year.

Further contributing to the market's reaction is the upcoming leadership transition at Nike. CEO John Donahoe is set to step down on October 14, with long-time Nike veteran Elliott Hill poised to take the reins. While Hill's return was framed as a positive by the company, the market often reacts cautiously to leadership changes, especially amid challenging business conditions.

For investors considering Nike stock, it's important to evaluate earnings growth and valuation. In the last quarter, Nike's earnings grew 34.62%. The company's price-to-earnings ratio is currently compressed 14.89% compared to last year, placing it below similar businesses in its sector.

Ultimately, the decision to buy or sell Nike stock depends on an individual's time horizon and risk tolerance.