Nike’s Earnings Reveal That Its Challenges Are Deeper Than Expected: Analysts Say It Could Get Worse

Analysts say it's unclear if Nike will even be able to achieve its revised outlook as it seeks to overcome an innovation lag and increased competition.

The light at the end of tunnel for Nike may be further out than initially expected.

The sneaker giant on Thursday cut its outlook for the upcoming fiscal year of 2025 after it reported a sales miss in Q4. In light of its current challenges — which include declines in lifestyle sales, foreign exchange headwinds and macroeconomic uncertainty — Nike now expects revenues for fiscal year 2025 to be down in the mid single digits, with revenues for the first half of the year down in the high single digits. In the first quarter, sales are expected to be down 10 percent, reflecting muted wholesale order books, a softer outlook in China, as well as other factors.

The stock was down more than 19 percent as of 11:30 a.m on Friday morning.

Nike chief executive officer John Donahoe said in a call with analysts on Thursday that fiscal year 2025 will be “a transition year” for the company, confirming to the market that recovery for the the shoe giant will not happen overnight and that things will likely get worse before they get better.

Analysts say it’s unclear if Nike will be able to achieve even its revised outlook as it seeks to overcome an innovation lag and increased competition from other brands in crucial categories like running.

“Nike is a mess and is deflated, as is any confidence we may have had,” wrote Williams Trading analyst Sam Poser in a Thursday note to investors. “The major problem is that the fiscal year 2025 guidance likely does not represent the worst case scenario.”

According to Poser, Nike will likely pivot too quickly from DTC channels to wholesale, which could lead to saturation of its products in the marketplace, increased promotional activity and a hit to brand equity.

“Nike is not as great a company today as it was prior to 2020, in our view, and does not appear to be heading the right direction despite management’s claims to the contrary,” Poser said. “We remain unconvinced that Nike has the team in place to once again become a growth company.”

In a note downgrading Nike stock from overweight to equal-weight, Morgan Stanley analysts led by Alex Straton were similarly disenchanted. The analysts pointed out that even Nike’s lowered full-year guidance “may not prove achievable” and that there could be more risk to profits ahead.

“We think recent volatility persists, keeping Nike’s long-term growth and profitability trajectory both unclear and below our prior hopes,” the analysts wrote.

UBS analyst Jay Sole was also skeptical in his Friday note to investors, in which he said a full recovery for Nike could take multiple years to achieve.

“Nike’s Q4 report indicated its fundamental trends are much worse than we realized,” Sole wrote. “Our key conclusion is there will be no quick rebound for Nike’s earnings. We believe Nike is embarking on what will be a multiyear reset of its business in order to return to healthy top-line growth rates.”

Not all market watchers felt the outlook was as bleak. Wedbush analyst Tom Nikic in a Thursday note maintained his outperform rating for Nike, with the “expectation that Nike will eventually ‘figure it out.'” However, the analyst added that the “conviction in our thesis has certainly taken a hit.”