Nike Earnings Loom As Downgrades and Declining Sales Weigh on The Stock

Nike, Inc. is poised to release its fourth-quarter fiscal 2025 earnings report after today's closing bell, with sentiment firmly bearish. In closing at $60.83, Nike's stock price (NYSE: NKE) comes into the report down 17.43% YTD, and a more concerning 35% over the past 12 months.

The report, to be followed by a conference call at 2:00 p.m. PT, will be dissected for clues about the company's ability to navigate a challenging economic landscape and reignite growth. The stakes are high, as recent analyst downgrades and a string of disappointing financial results have cast a shadow over the swoosh.

Analysts are bracing for a less-than-stellar Q4, with consensus estimates pointing to earnings per share (EPS) of just $0.12 on revenue of $10.72 billion. This EPS figure represents a dramatic decline from the $0.99 reported in the same quarter last year. The revenue estimate also reflects a substantial year-over-year decrease of 14.93%. These projections paint a grim picture, highlighting the significant pressures Nike is currently facing.

The lead-up to this earnings announcement has been fraught with negative sentiment. In the past two weeks, Nike's stock price target has been downgraded by Barclays ($53 from $60), Evercore ISI ($75 from $97), Deutsche Bank ($71 from $77), and most recently on Tuesday, Truist ($73 from $82). Theses downgrades reflect concerns about the company's financial outlook, triggering further bullish pressure leading in.

Nike's recent financial performance provides further context for the current apprehension. In the third quarter of fiscal 2025, the company reported revenues of $11.3 billion, a 9% year-over-year decrease, with a particularly alarming 17% decline in sales in China, a crucial growth market.

Earnings per share for the quarter fell by 30% to $0.54. The preceding quarter was equally disappointing, with revenues of $12.4 billion, down 8% from the previous year, and a 26% decrease in net income to $1.2 billion. The consistent downward trend in revenue and earnings has understandably fueled investor concerns about Nike's ability to maintain its market dominance.

In response to these declining revenues, Nike has been actively implementing strategic initiatives aimed at revitalizing its business. These initiatives include a focus on more disciplined product management, with a reduction in the supply of certain footwear products to prioritize new and innovative offerings.

The company is also working to reposition Nike Brand Digital as a full-price platform and reinvest in its wholesale distribution network. However, the effectiveness of these strategies remains to be seen, and the upcoming earnings report will provide crucial insights into their impact.

A bull may lean on Nike's significant brand equity and history of innovation that should not be discounted. The current low stock price may indeed present a buying opportunity for long-term investors who believe in the company's ability to adapt and overcome its current challenges. Furthermore, the strategic initiatives being implemented, while not yet reflected in the financial results, could eventually bear fruit. 

It is also possible that the company is intentionally managing expectations downward to set the stage for a positive surprise in future quarters.

The bears will continue to point to the continued decline in revenue, China sales decline, uncertainty surrounding the effectiveness of strategic initiatives, and the impact of tariffs.

All eyes will be glued to the report, but for now, the bears are firmly in charge of the narrative, and price action.