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Should NIKE Stock be in Your Portfolio Ahead of Q1 Earnings?
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NIKE Inc. (NKE - Free Report) is slated to release first-quarter fiscal 2025 results on Oct. 1. The leading sports apparel retailer is estimated to have witnessed year-over-year declines in the top and bottom lines in the fiscal first quarter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $11.6 billion, suggesting a 10% decline from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for the company’s fiscal first-quarter earnings is pegged at 51 cents per share, indicating a decline of 45.7% from the year-ago reported number. Earnings estimates for the fiscal first quarter have moved down by a penny in the last 30 days.
In the last reported quarter, the company delivered an earnings surprise of 18.8%. Its bottom line beat the consensus estimate by 27.6%, on average, in the trailing four quarters.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model conclusively predicts an earnings beat for NIKE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
NIKE’s first-quarter fiscal 2025 performance is expected to have been affected by continued challenges related to lifestyle product sales, headwinds in Greater China business and certain EMEA and other markets, and soft digital sales trends.
NIKE has been struggling due to sluggish sales in its lifestyle segment, overshadowing the strength of its performance products. The lifestyle category, which includes men’s, women’s, and Jordan lines, saw a dip in fourth-quarter fiscal 2024 after years of double-digit growth. The ongoing rise in inflation and higher interest rates have been impacting consumer spending, particularly on discretionary items, making consumers more selective with their purchases. This has been a major challenge for luxury retail brands, especially in North America.
This trend has been detrimental to other lifestyle and luxury brand retailers and sporting goods companies in the United States, including the likes of lululemon athletica inc. (LULU - Free Report) , Ralph Lauren Corporation (RL - Free Report) , and Crocs Inc. (CROX - Free Report) .
The reduced sales of NIKE’s lifestyle products have also caused significant impacts on digital sales. The decline in digital sales is also attributed to softer traffic, higher promotions, and lower sales of certain classic footwear franchises.
On the last reported quarter’s earnings call, NIKE stated that it is working to alter the timelines to tighten the total supply of certain classic footwear franchises across different channels around the world. The company is aggressively adjusting its plans for these franchises on NIKE Digital, where they have the highest share of the business. However, the company expects these actions to create several points of short-term headwinds on revenues throughout fiscal 2025, indicating weak digital sales in the to-be-reported quarter.
Recent trends reveal that NKE has been experiencing considerable shifts in consumer traffic in Greater China, which has been a focal point for its global strategy. The company noted the region’s highly promotional environment requires careful inventory management for NIKE and its partners. Consequently, it is less optimistic about the near-term outlook for Greater China.
On the last reported quarter’s earnings call, management anticipated lower NIKE Digital growth in the first half of fiscal 2025 due to decreased traffic from fewer launches, planned reductions in classic footwear franchises, lesser promotional activity, and increased macroeconomic uncertainty, particularly in Greater China, with uneven consumer trends continuing in EMEA and other global markets.
NIKE expects revenues to decline 10% year over year in first-quarter fiscal 2025, led by more aggressive actions in managing its classic footwear franchises, ongoing challenges in NIKE Digital, muted wholesale order books, a weaker outlook for Greater China, and several quarter-specific timing factors.
The company’s bleak fiscal first-quarter outlook indicates that the ongoing operational issues and macroeconomic conditions in China and other parts are far from recovery in the near term. While the company continues to retain its position as the leader in the athletic apparel and shoes industry with its underlying strengths, its financial recovery should take time.
While these factors profess a soft top-line performance for NIKE in first-quarter fiscal 2025, recent trends reveal that the company’s strategic pricing and supply chain optimization, including logistics, inventory management, and distribution, have been boosting gross margins. NKE predicted its fiscal first-quarter gross margins to remain in-line with the fiscal 2025 view of 10-30 bps expansion on a reported basis. Strategic pricing actions and reduced product input costs are expected to have aided gross margin in the fiscal first quarter.
The company has also been benefiting from its Consumer Direct Acceleration strategy. Effective inventory management strategies have been a critical component of NIKE's success. The company maintained a healthy inventory position at the end of fourth-quarter fiscal 2024.
NIKE’s Price Performance & Valuation
NIKE’s shares have exhibited a downward trend, shedding as much as 17.6% in the year-to-date period. The stock has declined against the broader Consumer Discretionary sector and the S&P 500’s growth of 3% and 20%, respectively. The NKE stock has also lagged the industry’s decline of 15.6% in the same period.
NKE’s Year-to-Date Stock Performance
Image Source: Zacks Investment Research
At the current price of $89.39, NKE trades at a 26.3% discount to its 52-week low of $70.75. The current price represents a 27.6% discount to the 52-week high mark of $123.39.
Despite this recent downturn, NKE’s valuation appears quite pricey. The company trades at a forward 12-month P/E multiple of 28.14X, exceeding the industry average of 23.94X and the S&P 500’s average of 21.86X.
Image Source: Zacks Investment Research
Given the premium valuation, investors could face significant risks if the company's future performance does not meet expectations. The Consumer Discretionary market is becoming increasingly competitive and NIKE’s initiatives may not suffice to drive significant growth. Macroeconomic challenges and heightened competition could impede the company's ability to sustain its current growth trajectory.
Investment Thesis
NIKE remains a market leader in the athletic goods industry, with a market cap of $134 billion, more than two times of the second-leading industry player Adidas’s $46.8 billion market cap. As a dominant player in the athletic footwear and apparel market, Nike has been benefiting from a combination of innovation, strategic partnerships, and effective marketing that fuels its revenue growth and profitability.
Nike continuously invests in cutting-edge product innovation, like Flyknit and Nike Air, ensuring it stays ahead of the competition. Its digital transformation efforts, including its direct-to-consumer strategy, have accelerated e-commerce growth and reduced dependence on wholesale channels. Nike’s focus on digital platforms and personalized consumer engagement further enhances margins and improves operational efficiency.
While NIKE's robust innovation pipeline, strategic initiatives and efficient inventory management may drive revenue growth in the long term, its near-term challenges in lifestyle products and Greater China cannot be ignored.
Conclusion
With NIKE set to report its first-quarter fiscal 2025 results, investors may be questioning whether now is the right time to buy the stock. The company’s strong market position and strategic initiatives present a promising outlook, making it appealing for those seeking exposure to a global leader in the athletic and lifestyle space with significant growth potential and a focus on shareholder value.
However, ongoing challenges in the lifestyle segment, Greater China, and broader economic pressures warrant careful consideration. Assessing these factors before the earnings release could provide a more informed perspective for investment decisions.
While NIKE’s long-term prospects remain strong, investors should avoid making hasty decisions. Monitoring developments and waiting for an optimal entry point is a prudent strategy, as acting too quickly could impact portfolio performance. If you already hold NKE stock, maintaining your position could be wise, as the upcoming earnings report is likely to offer greater clarity on the company’s outlook.
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Should NIKE Stock be in Your Portfolio Ahead of Q1 Earnings?
NIKE Inc. (NKE - Free Report) is slated to release first-quarter fiscal 2025 results on Oct. 1. The leading sports apparel retailer is estimated to have witnessed year-over-year declines in the top and bottom lines in the fiscal first quarter.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $11.6 billion, suggesting a 10% decline from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for the company’s fiscal first-quarter earnings is pegged at 51 cents per share, indicating a decline of 45.7% from the year-ago reported number. Earnings estimates for the fiscal first quarter have moved down by a penny in the last 30 days.
In the last reported quarter, the company delivered an earnings surprise of 18.8%. Its bottom line beat the consensus estimate by 27.6%, on average, in the trailing four quarters.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model conclusively predicts an earnings beat for NIKE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
NIKE has an Earnings ESP of +1.34% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
NIKE, Inc. Price and EPS Surprise
NIKE, Inc. price-eps-surprise | NIKE, Inc. Quote
What’s In-Store for NKE in Q1 Earnings?
NIKE’s first-quarter fiscal 2025 performance is expected to have been affected by continued challenges related to lifestyle product sales, headwinds in Greater China business and certain EMEA and other markets, and soft digital sales trends.
NIKE has been struggling due to sluggish sales in its lifestyle segment, overshadowing the strength of its performance products. The lifestyle category, which includes men’s, women’s, and Jordan lines, saw a dip in fourth-quarter fiscal 2024 after years of double-digit growth. The ongoing rise in inflation and higher interest rates have been impacting consumer spending, particularly on discretionary items, making consumers more selective with their purchases. This has been a major challenge for luxury retail brands, especially in North America.
This trend has been detrimental to other lifestyle and luxury brand retailers and sporting goods companies in the United States, including the likes of lululemon athletica inc. (LULU - Free Report) , Ralph Lauren Corporation (RL - Free Report) , and Crocs Inc. (CROX - Free Report) .
The reduced sales of NIKE’s lifestyle products have also caused significant impacts on digital sales. The decline in digital sales is also attributed to softer traffic, higher promotions, and lower sales of certain classic footwear franchises.
On the last reported quarter’s earnings call, NIKE stated that it is working to alter the timelines to tighten the total supply of certain classic footwear franchises across different channels around the world. The company is aggressively adjusting its plans for these franchises on NIKE Digital, where they have the highest share of the business. However, the company expects these actions to create several points of short-term headwinds on revenues throughout fiscal 2025, indicating weak digital sales in the to-be-reported quarter.
Recent trends reveal that NKE has been experiencing considerable shifts in consumer traffic in Greater China, which has been a focal point for its global strategy. The company noted the region’s highly promotional environment requires careful inventory management for NIKE and its partners. Consequently, it is less optimistic about the near-term outlook for Greater China.
On the last reported quarter’s earnings call, management anticipated lower NIKE Digital growth in the first half of fiscal 2025 due to decreased traffic from fewer launches, planned reductions in classic footwear franchises, lesser promotional activity, and increased macroeconomic uncertainty, particularly in Greater China, with uneven consumer trends continuing in EMEA and other global markets.
NIKE expects revenues to decline 10% year over year in first-quarter fiscal 2025, led by more aggressive actions in managing its classic footwear franchises, ongoing challenges in NIKE Digital, muted wholesale order books, a weaker outlook for Greater China, and several quarter-specific timing factors.
The company’s bleak fiscal first-quarter outlook indicates that the ongoing operational issues and macroeconomic conditions in China and other parts are far from recovery in the near term. While the company continues to retain its position as the leader in the athletic apparel and shoes industry with its underlying strengths, its financial recovery should take time.
While these factors profess a soft top-line performance for NIKE in first-quarter fiscal 2025, recent trends reveal that the company’s strategic pricing and supply chain optimization, including logistics, inventory management, and distribution, have been boosting gross margins. NKE predicted its fiscal first-quarter gross margins to remain in-line with the fiscal 2025 view of 10-30 bps expansion on a reported basis. Strategic pricing actions and reduced product input costs are expected to have aided gross margin in the fiscal first quarter.
The company has also been benefiting from its Consumer Direct Acceleration strategy. Effective inventory management strategies have been a critical component of NIKE's success. The company maintained a healthy inventory position at the end of fourth-quarter fiscal 2024.
NIKE’s Price Performance & Valuation
NIKE’s shares have exhibited a downward trend, shedding as much as 17.6% in the year-to-date period. The stock has declined against the broader Consumer Discretionary sector and the S&P 500’s growth of 3% and 20%, respectively. The NKE stock has also lagged the industry’s decline of 15.6% in the same period.
NKE’s Year-to-Date Stock Performance
Image Source: Zacks Investment Research
At the current price of $89.39, NKE trades at a 26.3% discount to its 52-week low of $70.75. The current price represents a 27.6% discount to the 52-week high mark of $123.39.
Despite this recent downturn, NKE’s valuation appears quite pricey. The company trades at a forward 12-month P/E multiple of 28.14X, exceeding the industry average of 23.94X and the S&P 500’s average of 21.86X.
Image Source: Zacks Investment Research
Given the premium valuation, investors could face significant risks if the company's future performance does not meet expectations. The Consumer Discretionary market is becoming increasingly competitive and NIKE’s initiatives may not suffice to drive significant growth. Macroeconomic challenges and heightened competition could impede the company's ability to sustain its current growth trajectory.
Investment Thesis
NIKE remains a market leader in the athletic goods industry, with a market cap of $134 billion, more than two times of the second-leading industry player Adidas’s $46.8 billion market cap. As a dominant player in the athletic footwear and apparel market, Nike has been benefiting from a combination of innovation, strategic partnerships, and effective marketing that fuels its revenue growth and profitability.
Nike continuously invests in cutting-edge product innovation, like Flyknit and Nike Air, ensuring it stays ahead of the competition. Its digital transformation efforts, including its direct-to-consumer strategy, have accelerated e-commerce growth and reduced dependence on wholesale channels. Nike’s focus on digital platforms and personalized consumer engagement further enhances margins and improves operational efficiency.
While NIKE's robust innovation pipeline, strategic initiatives and efficient inventory management may drive revenue growth in the long term, its near-term challenges in lifestyle products and Greater China cannot be ignored.
Conclusion
With NIKE set to report its first-quarter fiscal 2025 results, investors may be questioning whether now is the right time to buy the stock. The company’s strong market position and strategic initiatives present a promising outlook, making it appealing for those seeking exposure to a global leader in the athletic and lifestyle space with significant growth potential and a focus on shareholder value.
However, ongoing challenges in the lifestyle segment, Greater China, and broader economic pressures warrant careful consideration. Assessing these factors before the earnings release could provide a more informed perspective for investment decisions.
While NIKE’s long-term prospects remain strong, investors should avoid making hasty decisions. Monitoring developments and waiting for an optimal entry point is a prudent strategy, as acting too quickly could impact portfolio performance. If you already hold NKE stock, maintaining your position could be wise, as the upcoming earnings report is likely to offer greater clarity on the company’s outlook.