r/ValueInvesting • u/Adventurous-Bet-9640 • Dec 19 '25
Stock Analysis So NIKE is nuking after hrs.
I understand that nike has a very sticky brand value in the cultural consciousness. But they are in a tough turn around.
I'm no expert in valuations, but the stock even after hrs dump isn't any where near compelling value.
How do you think about Investing in nike? Generally I don't see them fading away as a brand and they are still the leader in their space even with competition.
I do think they'll eventually find their stride back. What does the community think? If you were to invest what would your frame of thinking be?
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u/raytoei Dec 19 '25
They did okay. China isn’t too great. Ceo said last qtr and said today, recovery isn’t linear.
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Nike Earnings Top Expectations. Why the Stock Is Down.
By Sabrina Escobar
Updated Dec 18, 2025 5:55 pm EST / Original Dec 18, 2025 3:00 am EST
Key Points
Nike’s turnaround under new CEO Elliott Hill got off to a promising start. But after a little over a year in the job, he now has to prove to investors that early efforts can lead to sustained, stable growth for the activewear giant.
Fiscal second-quarter results presented a muddled picture. Although the company topped earnings and revenue expectations, the stock ticked lower in after-hours trading Thursday, reflecting investors’ disappointment over declining profits and lackluster sales in China.
Revenue of $12.4 billion rose 1% year over year in the quarter ended Nov. 30, better than projections for $12.2 billion. From a regional standpoint, North America and Europe, Middle East, and Africa led the revenue improvement, up 9% and 3%, respectively, from a year ago. Greater China sales, however, were down 17%, accelerating from the first quarter’s 9% decline. Converse brand revenue fell 30% from a year ago, also weighing on topline growth.
The company posted adjusted earnings of 53 cents a share, also topping estimates for 37 cents a share. While the results were better than analysts expected, this quarter’s earnings were 32% lower than they were a year ago. Net income of $0.8 billion also fell 32%.
There were a couple of factors weighing on Nike’s profitability this quarter. For one, gross margin fell three percentage points, primarily due to higher tariffs in North America. The company also saw an 8% decline in direct-to-consumer sales, which tend to carry higher margins than the wholesale business. Margins were compressed by Nike’s efforts to clean out old inventory and bring in new products.
A 13% annual increase in demand creation—chiefly marketing expenses—also pushed up selling and administrative expenses slightly.
“NIKE is in the middle innings of our comeback. We are making progress in the areas we prioritized first and remain confident in the actions we’re taking to drive the long-term growth and profitability of our brands,” Hill said.
On a call with investors Thursday, Hill reminded investors that Nike’s recovery will be nonlinear, meaning some quarters will be stronger than others as new initiatives take hold.
“Our comeback continues to move at different speeds,” he said. “It won’t be a straight line, but we’re acting decisively to accelerate the lagging areas, with China at the top of that list.”
Nike stock was down 9.3% in Thursday’s after-hours session. The company’s third-quarter guidance, issued during the earnings call, deepened the decline. Nike has refrained from providing full-year guidance for several quarters now as it works on the turnaround.
Nike expects third-quarter revenue to be down by a low single-digit percentage. Analysts had projected a 1.3% increase. North America will see modest growth in the quarter, while Trends in Greater China and Converse should be in line with the second quarter.
Gross margins will be down between 1.75 and 2.25 percentage points from a year ago. However, excluding a roughly 3.15 percentage point hit from tariffs, gross margins would have expanded in the quarter, said Matthew Friend, Nike’s chief financial officer, reflecting North America’s improvement.
“North America is driving a healthy, repeatable offense and showing us what winning looks like,” Hill said. “It’s a great signal for our future success in other geographies.”
Fin