Nike (NKE) stock fell nearly 20% on Friday after the retailer said it expects revenue to decline more than it previously thought in the coming year.
The company said Thursday it expects revenue to fall mid-single digits in 2025, including an expected 10% decline in the first quarter. Nike had initially guided for overall sales growth in 2025.
Friday marked the worst single-day decline in Nike stock's history.
The guidance reflects a continuing trend from Nike's fiscal 2024 fourth quarter, which the shoemaker reported after the closing bell on Thursday. The company said quarterly revenue in the fourth quarter fell 2% from the year prior to $12.61 billion, below Wall Street's estimates for $12.86 billion. Meanwhile, Nike's $0.99 earnings per share exceeded analysts' expectations of $0.66. Nike's direct-to-consumer sales declined 8% from the same quarter a year ago to $5.1 billion.
"Fiscal [2025] will be a transition year for our business," Nike CEO John Donahoe said during the company's earnings call.
The company has been trying to reignite sales growth in what has been a lackluster year for the stock so far. Morningstar equity analyst David Swartz told Yahoo Finance the sales number was "pretty weak" and was the main concern from the release.
Morgan Stanley analyst Alex Straton downgraded Nike to Equalweight from Overweight following the earnings call, noting Nike stock has been "put in the penalty box" for the near-term. Straton cut her price target to $79 from $114.
"While undergoing strategic change, recent performance has been riddled with quarterly
misses & guidance cuts," Straton wrote in a note to clients. "NKE’s long-term growth & profitability trajectory is subsequently both unclear & lower than our prior assumption."
The company's stock had already entered the release down more than 17% over the last year, a far cry from the S&P 500's (^GSPC) 26% gain, as investors grew wary of slowing growth at the retailer.
"We doubt many investors will view this as a 'buy the pullback' event, and we think NKE shares are headed for a stay in the proverbial penalty box until new product innovations actually start to manifest themselves and management regains investor trust," Wedbush senior vice president of equity research Tom Nikic wrote in a note following the earnings call.
Wall Street has been closely watching Nike's product pipeline as the Oregon-based company works to fend off competition in its core athletic footwear market from rivals like Adidas (ADDYY) and relative upstarts like On (ONON) and Deckers' (DECK) Hoka brand.
Nike executives stressed they believe their plans to scale new products are on "track" and will impact the company's financials by the end of the year.
"We are planning for meaningful, sequential improvement in the second half versus the first half, and it starts with the confidence that we have around the new products that we're bringing to market," Nike CFO Matthew Friend said on the earnings call.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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