Why Nike Stock Got Crushed Today
Key Points
Nike posted stronger than expected earnings for fiscal Q4, but that wasn't enough to stop its stock from selling off.
The company's forward guidance disappointed investors.
Revenue is projected to fall between 2% and 3% this quarter, with sales in the Greater China geographic segment down roughly 20%.
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Nike (NYSE: NKE) published its fiscal Q3 results after the market closed yesterday, and the report spurred a big sell-off in Wednesday's daily trading session. The company's share price closed out the day down 15.5%. Meanwhile, the S&P 500 gained 0.7% in the day's trading.
The company's earnings of $0.35 per share in the quarter actually came in significantly ahead of the average analyst estimate's call for a per-share profit of $0.28, and sales of approximately $11.3 billion in the quarter were roughly in line with the average Wall Street target. On the other hand, the company's forward guidance points to headwinds for the turnaround effort.
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Nike's struggles continued last quarter
Nike's overall revenue fell roughly 3% year over year on a currency-adjusted basis last quarter, and earnings per share fell approximately 54% compared to the prior-year period. In addition to the sales decline, earnings performance was also pressured by weakening margins -- with the company's gross margin declining to 40.2% from 41.5% in last year's quarter. Management attributed the majority of the gross-margin decline to the impact of tariffs in its North America segment.
What's next for Nike?
Nike's guidance for the current quarter suggests that the company's turnaround project will face some significant headwinds in the near term. The company expects that sales will fall between 2% and 4% year over year in the current quarter. Meanwhile, the average analyst estimate had actually called for the business to increase revenue at roughly 1.9% on an annual basis.
Weakening performance for the company's Greater China segment is at the heart of the weaker-than-expected sales forecast for the current quarter. With Nike guiding for a 20% year-over-year sales decline for the geographic segment in the current quarter and continued weakness in the current fiscal year, overall revenue is poised to remain under pressure.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.
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