Investing.com — nike Shares initially soared in after-hours trading after the company beat second-quarter earnings estimates. However, the stock reversed and fell after disappointing guidance and updates were released during the earnings release.
Nike (NYSE:) stock fell 4% in pre-market trading on Friday.
The sportswear giant reported second-quarter earnings per share (EPS) of $0.78 on revenue of $12.4 billion. Analyst estimates compiled by Investing.com were for EPS of $0.65 and revenue of $12.18 billion.
Sales fell 8%, with Nike brand sales down 7% to $12 billion. According to the company, gross profit margin decreased 100 basis points to 43.6% due to “increased discount rates and changes in channel mix.”
The company continues to struggle in China, where sales fell 27% to $375 million.
New President and CEO Elliott Hill has announced several key goals, including a stronger focus on sports, accelerating innovation, strengthening the brand by reducing e-commerce promotions, and strengthening partnerships with wholesale distributors. Highlighted strategic priorities.
Looking ahead, Nike expects sales to fall in the low double digits in the third quarter, falling short of the 8% decline expected by analysts. The company also said it expects sales to decline further in the fourth quarter, compared to the current forecast of a 6% decline.
According to raymond (NS:) The outlook reflects Nike’s accelerated efforts to clear excess inventory and relaunch direct and wholesale sales to build a stronger foundation for brand growth and improvement, according to analysts at James. Reflects a continued effort to adjust. As innovation advances, classic products continue to be managed at lower prices.” “
“In our opinion, Nike remains a ‘Show Me’ story. Accelerating innovation and elevating the brand are the right moves, but especially in a context where historical tailwinds (directly China) remain. Given this, it is unclear if and when revenues will increase further,” they added. .
Separately, Jefferies analysts praised Hill’s vision but highlighted product and distribution failures under Nike’s previous leadership that left the company vulnerable.
Analysts led by Randall J. Connick wrote, “It is clear that competition in both the performance and classic categories means that NKE is losing significant market share to Pac-Man.”
“The guidance points to serious problems, and newness doesn’t necessarily make things better, as the significant decline in digital revenue shows. Bottom line: Never buy.”
Jefferies lowered its price target on NKE stock from $85 to $75 and reiterated its hold rating.
Yassin Ebrahim contributed to this report.
