Nike Earnings: Dim Sales Outlook Slams Shares but Patient Investors Could Be Rewarded

Nike’s shares roughly doubled their year-to-date decline with a 12% tumble in June 27 aftermarket trading as persistent sales weakness has added uncertainty to the firm's turnaround. Although the firm had warned of a difficult demand environment for sportswear and we had lowered our estimates, market conditions are more challenging than expected. Specifically, after posting flat sales growth in (May-ended) fiscal 2024, Nike guided to a mid-single-digit percentage sales decline for fiscal 2025. Given that we had projected 1% sales growth, we expect to reduce our fair value estimate of $129 per share by a low-single-digit percentage. Even so, we regard the share price weakness as an opportunity for long-term investors, given that the wide-moat sportswear leader stands to benefit over the next few years from its planned marketing and product initiatives and the growth of the global market.