Stock Market Today, April 1: Nike Shares Plunge After Weak Guidance and Analyst Downgrades
Nike (NYSE:NKE), the athletic footwear, apparel, and equipment juggernaut, closed Wednesday at $44.62, down 15.52%. The stock dropped after weak fiscal Q3 guidance and analyst downgrades, amid investor focus on the extended turnaround timeline, China demand, and margin recovery. Trading volume reached 109.4 million shares, coming in about 516% above its three-month average of 17.7 million shares. Nike IPO'd in 1980 and has grown 24,733% since going public.
How the markets moved today
S&P 500 rose 0.71% to 6,575, while the Nasdaq Composite gained 1.16% to finish at 21,841. Among athletic footwear and apparel peers, Adidas closed at $79.46, down 0.91%, while Puma finished at $2.6, up 5.92%.
What this means for investors
Nike reported third-quarter earnings on Tuesday that beat Wall Street’s expectations, but the stock sank 16% today. Management guided for sales to decline 3% over the next nine months — alongside a minor sequential improvement in gross profit margins in Q4 -- which didn’t assuage investor fears.
Simply put, Nike’s turnaround may need more time.
That said, while revenue was flat in Q3, its North American wholesale segment grew by 11%, which is critical for investors to see, as this area has been the focus of its turnaround efforts after the company ceded valuable store shelf positioning to its peers during the pandemic. However, the company is still using clearance prices to remove excess and outdated inventory, which continues to weigh on margins. At just 1.4 times sales, Nike is the cheapest it has been since 2009.
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Josh Kohn-Lindquist has positions in Adidas. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.
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