Why Nike shares plummeted 31% in the first half of 2024

Nike's fiscal calendar is different from conventional calendars, and the 2024 fiscal year ended in May. On March 21, the company announced financial results for the third quarter of 2024. Then, financial results for the fourth quarter were announced on 6/27. Stock prices had already fallen year to date, but the decline after the fourth quarter report was more pronounced.

Nike's 2024 headline numbers alone are not alarming. Sales for the full year increased slightly, gross profit margin improved, and net profit was 5.7 billion dollars, up 12% from the previous year. However, there was something that made investors uneasy.

According to TipRanks, 20 analysts recommended buying Nike shares at the beginning of the year. Now there are only 13 people.

In the fourth quarter, strong headwinds began to blow into Nike's business. And now, management anticipates that 2025 will be tough. In the full year, earnings are expected to decrease, specific expenses are expected to increase, and there is a possibility that net profit will also decrease.

It's an interesting situation for Nike. Shoe stocks have been doing well in recent years because consumers are increasingly buying directly from companies online instead of shopping at other retail stores. However, in the fourth quarter, Nike's direct revenue declined, while wholesale revenue increased.

However, the benefits of wholesale revenue were temporary, and retailers simply replenished their shelves. Since Nike will not benefit from such wholesale revenue in the upcoming first quarter of the 2025 fiscal year, management anticipates a 10% decrease in sales compared to the same period last year.

In other words, Nike's short-term outlook is not good. Management seems to think sales will recover if they start launching new products later this year.

The management team is already2025 is called the “transition period”Better days are likely to be over a year away.