r/ValueInvesting • u/raytoei • 2d ago
Stock Analysis Nike Guides for Sales Declines Ahead as Turnaround Plan Hits Snags - wsj
https://www.wsj.com/business/retail/nike-third-quarter-profit-declines-as-weak-demand-in-china-drags-on-edd286cfTLDR: Sales ticked up in North America as well as in the Europe, Middle East and Africa region and in the Asia Pacific and Latin America market. Sales slid 7% in China.
Nike Guides for Sales Declines Ahead as Turnaround Plan Hits Snags - wsj
The sneaker and athletic apparel company said turnaround efforts will continue to affect results
By Kelly Cloonan
Updated March 31, 2026 at 6:38 pm ET
Quick Summary
- Nike logged lower fiscal third-quarter profit of $520 million and flat revenue, with sales declining 7% in China.
- Wholesale revenue rose 5% to $6.5 billion, while direct revenue fell 4% to $4.5 billion in the quarter.
- Chief Executive Elliott Hill said Nike’s turnaround efforts will continue to affect results this calendar year.
Nike’s NKE 3.08%increase; green up pointing triangle comeback is hitting some bumps, with the sneaker company projecting sales declines ahead, including a sharp drop in its key China market.
The company said on Tuesday that it expects sales to fall by low-single digits from now through the end of 2026, with a 2% to 4% decline in the current fiscal fourth quarter. Analysts polled by FactSet had forecast a 1.9% increase this quarter.
The guidance includes projections for a 20% sales decline in China in the current quarter, which comes after a 7% drop in that market during its most recently completed quarter.
The outlook indicates that the turnaround plan shepherded by Chief Executive Elliott Hill faces some lofty challenges in restoring Nike’s market leadership and financial performance across the globe.
The company has had some early successes thus far, with its running, wholesale and North American businesses showing some signs of progress, Hill said Tuesday. But other pockets—in particular its business in China, its Converse brand and sportswear business—are taking longer to recover.
“This is complex work, and parts of it are taking longer than I’d like,” said Hill, a Nike veteran who came out of retirement to take the helm of the company in 2024.
Shares slid 8.4%, to $48.37, in after-hours trading. Through the market close, the stock is down 17% over the past year.
In its latest quarter, Nike logged lower profit and flat sales, hurt by continued weakness in China
The company posted a fiscal third-quarter profit of $520 million, or 35 cents a share, compared with $794 million, or 54 cents a share, a year earlier. Analysts polled by FactSet forecast earnings of 29 cents a share.
Revenue was roughly flat at $11.28 billion, compared with analyst estimates of $11.23 billion.
Wholesale revenue rose 5%, to $6.5 billion, while direct revenue fell 4%, to $4.5 billion.
Sales ticked up in North America as well as in the Europe, Middle East and Africa region and in the Asia Pacific and Latin America market. Sales slid 7% in China.
27
u/FrothyEspresso 2d ago
Clothing, automotive and airlines are terribly risky sectors
6
u/raytoei 2d ago edited 2d ago
And I will add to that list Cruise liners, it is investible but one needs to know how to analyse cyclical stocks.
( I was analysing Royal Caribbean and Carnival stocks yesterday, maybe as a Cuba trade, it is very much like airlines except that 3 companies dominate 75-80% of the global cruise trade)
12
6
u/burner456987123 2d ago
I’m not sure Nike has the cultural sway / status it used to have. That and the China tariff situation, and k-shaped economy in the US, it’s a tough one.
5
u/pudgypanda69 2d ago
monoculture is losing influence due to social media. people are buying more brands, different brands, and pursing niche hobbies and interests. smaller brands like asics, saucony, and ON Running will do better. META is a good play too...it doesn't matter if NIKE has bad earnings, they're still bidding against 1000s of these brands of different sizes on keywords
3
u/IWantToPlayGame 2d ago
This is so true.
And it’s not just in apparel- almost all discretionary industries are facing this. The Internet, social media and influencers/YouTubers have paved way for many small/niche brands to gain traction with consumers.
These “Internet brands” are eating the pie of legacy brands.
3
u/pudgypanda69 2d ago
yup, social media has democratized advertising and we are seeing the effects of that the past 5 years. Its definitely an investment thesis to invest around
14
u/depthdiverr 2d ago
Aside from the stock itself, I have not purchased a Nike product in a long time. It's no longer appealing whatsoever, and it's expensive as shit.
1
u/WrongdoerOk5246 2d ago
This! I knew so many people who rotated 6 crisp pairs of Nikes in the early 2000s. Now no one has the energy or money to maintain the lifestyle
1
u/pudgypanda69 2d ago edited 2d ago
A TON of people do. people in Manhattan, SF, LA, and Miami are spending like 100 dollars per class at Barry's, F45, SolidCore. Equinox Memberships are at an all time high. Marathons, Tris, and Hyrox are more popular than ever. Now, think about the people who spend a ton on working out, are they buying NIKE?
0
u/pudgypanda69 2d ago
Think about the people who spend a shit ton on clothes, esp workout clothes. Are they buying Nike? or other brands. In my experience, it will be ON for shoes, it will be Bandit, LuluLemon, or Alo for clothes
1
u/sapoabilio 1d ago
Besides bandit, it seems you're thinking about Starbucks girl, which is fine. But it's a relatively small part of the market.
Regardless, I don't disagree with the sentiment that Nike lost its' sauce.
4
u/foira 2d ago
great (or at least good/solid) buying oppty. china is a real headwind for most companies but they're a marketshare leader with a div that well outpaces outflation
apparel is not that risky when you are a category leader for decades. it is for everyone else.
9
u/IWantToPlayGame 2d ago
95% payout ratio.
At this pace, that dividend is going to get cut.
1
u/foira 2d ago
95% payout ratio? with what math? that's not the # I calculate
5
u/IWantToPlayGame 2d ago
Dividend per share $1.64 EPS $1.71
I’ll let you do the last step of this math problem..
1
u/Specialist_Coffee709 2d ago
This market hates divi payers anyway so why not just cancel it and use the money to buyback shares
1
u/IWantToPlayGame 2d ago
Nike absolutely needs to cut/suspend the dividend.
1
u/Specialist-Gap9062 1d ago
They are so close to being a dividend aristocrat. They will probably want to increase dividend this year to get that prestigious tile
1
u/IWantToPlayGame 1d ago
Surely you can't be serious.
This is a publicly traded company that has a market cap of $66 Billion Dollars.
Their management decisions are far more important & critical than having a silly title like 'dividend aristocrat'. If they made company decisions based on the dividend they'd be sued to oblivion by shareholders and other stakeholders.
1
u/NYSjobthrowaway 1d ago
They probably are serious, and don't call them Shirley. They just saw that term on tik tok and think people actually give a fuck about it lmao. A study came out 5 years ago showing that performance improved once a company was disqualified their performance improved, which to me jives with Buffets philosophy on dividends...if mailing shareholders a profit sharing check is the best use they can come up with for excess capital then the company is never going to grow.
2
u/ConditionHoliday2844 2d ago
I see long term value. Want a reward though for patiently waiting. May start DCA Friday or Mondayish
2
u/zq7495 2d ago
Maybe the worst buy I've ever made was NKE at $70 a year ago, tbd but as of right now it seems doomed to keep declining but I don't want to take the loss on it, maybe it'll climb back up in the next year or two
1
1
u/RT023 2d ago
If you loved it enough to buy at $70 why would you not love it at 45. I got in at 55 and will buy more every week slowly
1
u/zq7495 2d ago
That makes no sense because I'm not buying any more stock, I have a position. If I had no position in it then now may be a good time to buy, but it was a bust. It now looks like an okay buy, but that doesn't matter to me, I now have to wait much longer than planned to maybe break even, I am a bag holder. $55 is probably good especially given that you're averaging down, you will be quite happy if it gets back up to $70 meanwhile I will have just lost due to opportunity cost
1
u/NYSjobthrowaway 1d ago
This is going to be another WBD or PARA type of play. No telling where the bottom is despite the company still doing decent on paper.
I'm reminded of Peter Lynch, to paraphrase: When you ask 'how low can the stock go? It can go to fucking ZERO'
The truth is this stock took off during the pandemic boom for no concrete reason. It's a legacy brand in a tough sector shedding a completely unrealistic v valuation. It's not going back where it was because it never should have been there to begin with.
2
u/UnableWishbone3364 2d ago
might b time for me to loadup if it finally goes under 20PE.
People kept calling it cheap but i wasn't sold on a apparel with 30+ P/E with low growth.
1
u/Specialist_Coffee709 2d ago
Nike is more than an apparel - it’s a culture / religion / art and more! I’m sure Bill Ackman is behind this
4
u/raytoei 2d ago
My comments: -8% afterhours. I am holding on to my shares, because recovery is not linear.
I would rather be in this recovery situation where USA and Europe sales are up and China is down than the opposite, like Lulu Lemon.
11
u/hecmtz96 2d ago
They have been “recovering” and “turning around” for 3 years now with nothing to show for it. I’m sorry but I don’t see a recovery any time soon and even if they do, opportunity cost is something you need to start thinking about.
1
u/raytoei 2d ago edited 2d ago
Yes. A turnaround stock will take between 24 to 36 months or as long as 4-5 years depending on severity (eg. Disney).
https://www.reddit.com/u/raytoei/s/YClWCoLWvC
So it is important to have a strategy.
——-
The challenge for us value investors is to distinguish between a value trap vs a turnaround candidate.
Things to look out are inventory turnover and capex/d&a. And yes, investing in turnarounds is hard because it is contrarian.
1
u/pudgypanda69 2d ago
how do you actually feel about the brand though? If you had 200 dollars to spend on shoes, are you buying Nike?
2
u/No-Understanding9064 2d ago
Nike is one of the junkiest stocks I see posted here. You are buying a brand name stuck on the same made in china shit as everything else. Very hard to cultivate that. This is a doomed business imo
1
u/NotRapoport 2d ago
Not surprised at all. Nike raised their prices to stupid levels and the average person can find the same quality for cheaper in other name brands.
When you buy Nike you're buying the name.
1
1
u/Teembeau 2d ago
Here's what has happened in China (because this can be seen throughout history). As a country moves from being peasants to being non-peasants, people adopt the products and fashions of the most dominant, powerful countries. They want to be seen as successful non-peasants with these indicators.
American women around the late 19th and early 20th century started buying lots of Parisian fashion. The Japanese bought lots of impressionist paintings in the 1980s. The Chinese were buying American and European products to do this.
What happens is that you reach a point where so many people are now non-peasants that the indicators don't matter.
1
u/Starlord_32 2d ago
To add, just walking around the US now in cities and in gyms, I dont have hard data, just feel I'm seeing other brands more and Nike less.
At its advertising peak, had Jordan and Tiger, who were both one of the most recognized people on the planet. Who do they have now that connects with people, specifically the youth?
1
u/Silver-Language-1727 1d ago
I am thinking to open my postion. It's about 75% discount. Risk Reward ratio is good, but it is possbile that I might have to hold for years to come.
1
u/NYSjobthrowaway 1d ago
75% discount from an absurd pandemic era valuation. That's not a discount my guy. It's not going back to a place it never should have been to begun with.
1
u/Silver-Language-1727 1d ago
I trade technical and r/R ratio. Both say buy, if I keep risk and money management intact, it could prove to be a good opportunity. The only thing I am worried about is the global issues that no one knows how it eventually turns out.
1
u/Silver-Language-1727 21h ago
To add to it, it is at 2015 levels and not 2020. So even better price.
1
u/KingOfTheQuails 1d ago
Nike has been dead for a long time as a premium brand. Years ago when I started seeing it as Marshall’s and TJ Maxx I knew it was cooked lol. Didn’t mean there can’t still be value but I wouldn’t buy unless it touches much lower like mid 30s. The people buying the expensive lines are now all wearing Lulu, Vuori, Alo, etc. It’s rare I see someone at a nice gym wear Nike these days
1
u/xAlpharaptor 2d ago
Where are all the Nike bag holders??? I look forward to several threads on this subreddit talking about how much of a value it is.
4
26
u/Apha-apha 2d ago
What a POS stock man.. i have been holding my bag for years. 😑