NIKE Stock Slopes Down 9% in a Month: Stay the Course or Exit Now?

NIKE Inc. NKE has been in troubled waters since the start of 2024 due to challenges related to its operations, highlighted by sluggish lifestyle segment sales, issues in Greater China and reduced digital sales. These factors are affecting the company’s share price performance, which has rolled down 9% in the past month.Shares of the Beaverton, OR-based company also underperformed its industry peers, which collectively declined 5.9% in the past month. The NKE stock compared unfavorably against the broader Consumer Discretionary sector and the S&P 500 Index’s growth of 2.4% and 2.2%, respectively, in the same period.NIKE's performance is notably weaker than its close competitor lululemon athletica inc. LULU, which has grown 12.9% in a month. NKE has lagged other industry peers, including Adidas ADDYY and Skechers’ SKX 6.3% and 5.8% declines, respectively.NKE’s One-Month Stock Performance Image Source: Zacks Investment Research At the current share price of $80.05, NIKE trades close to its 52-week low mark of $70.75. The stock price reflects a 13.1% premium to the company’s recent 52-week low. Meanwhile, the NKE stock’s price reflects a 35.1% discount from its 52-week high of $123.39. NIKE trades below its 50 and 200-day moving averages, indicating a bearish sentiment.NIKE Stock Trades Below 50-Day & 200-Day Moving Averages Image Source: Zacks Investment Research What’s Hindering NIKE’s Stock Performance?NIKE’s hardships mainly relate to the continued softness in sales for its lifestyle category, reduced digital sales and headwinds in Greater China. These ongoing issues significantly impacted the company’s first-quarter fiscal 2025 results, with year-over-year declines in revenue and profits.The lifestyle segment, which includes men's, women's and Jordan products, saw a decline in first-quarter fiscal 2025, following years of double-digit growth. This decrease also hurt NIKE’s Digital sales, which dropped 20% in the quarter.NIKE’s sales reflected the impacts of lower-than-planned unit sales and higher-than-expected traffic declines at NIKE Direct. The traffic declines were more pronounced at NIKE Digital and the company’s partner stores in Greater China. This led to lower-than-planned retail sales, including wholesale partners, due to slightly higher inventories, which resulted in increased promotional activity to drive conversion.Looking forward, NIKE plans to adjust the supply of certain classic footwear lines across channels, particularly on NIKE Digital, wherein it holds the largest market share. However, these efforts are expected to create short-term revenue challenges in fiscal 2025. The company expects implications for certain dimensions of the business, with double-digit declines anticipated for both its Men’s and Women’s lifestyle businesses, the Jordan Brand and NIKE Digital for fiscal 2025.In Greater China, consumer traffic continues declining, particularly in brick-and-mortar stores. First-quarter fiscal 2025 revenues from NIKE Direct in the region fell 16% year over year, with NIKE Digital dropping 34%. This led to an overall revenue decline of 4% in Greater China for the quarter.NKE Pulled FY25 View & Soft Q2 ProjectionsFollowing the recent CEO transition and with three quarters left in the fiscal year, Nike withdrew its fiscal 2025 guidance. This decision allows the new CEO, Elliott Hill, to evaluate current strategies and business trends, and develop plans for fiscal 2026 and beyond. As part of this transition, the company also postponed its previously scheduled Investor Day.However, NKE committed to providing quarterly guidance for the rest of the year. For the second quarter of fiscal 2025, it expects a revenue decline of 8-10%. The company also anticipates a 150-bps drop in gross margin due to higher promotional activity, channel mix challenges and supply-chain inefficiencies. SG&A expenses are projected to remain flat year over year, with higher demand creation costs, offset by reduced operating overhead.Looking ahead, NIKE expects revenue growth to slow, driven by weaker traffic on NIKE Digital, softer retail sales trends across the marketplace and final spring order volumes. Franchise management efforts will continue throughout the year, with a similar scale of impact as seen in the first quarter.NIKE also expects year-over-year gross margin declines in the coming quarters due to ongoing challenges from promotions, channel mix and supply-chain pressures. The company plans to maintain cost discipline, particularly in operating overhead, while increasing investments to bolster brand momentum.NKE’s Estimates Follow Suit: Trend DownThe Zacks Consensus Estimate for NIKE’s fiscal 2025 and 2026 EPS has declined 19.3% and 8.1%, respectively, in the past 30 days. The downward revisions in earnings estimates indicate analysts’ reduced confidence in the stock.For fiscal 2024, the Zacks Consensus Estimate for NKE’s sales and EPS implies 7.4% and 29.6% year-over-year growth, respectively. For second-quarter fiscal 2025, the consensus mark for sales and EPS indicates 9% and 35% year-over-year growth, respectively.Find the latest EPS estimates and surprises on Zacks Earnings Calendar. Image Source: Zacks Investment Research What Does NKE’s Premium Valuation Mean?Despite the stock’s lackluster performance, NIKE is currently trading at a forward 12-month P/E multiple of 27.3X, exceeding the industry average of 26.31X and the S&P 500’s average of 22.22X.Though trading much below its five-year high of 48.27X, the current valuation may still be considered expensive, given the significant downside risks if the company's ongoing perils are not resolved for a prolonged period. Image Source: Zacks Investment Research Should Investors Stick With NKE Stock or Cash Out?Despite NIKE’s leadership in the athletic goods industry, the company is in for some grave consequences due to the challenges in lifestyle products and Greater China. Its first-quarter results and withdrawn fiscal 2025 view indicate that the company’s recovery from these headwinds will take time. This warrants a cautious approach for existing investors.Potential investors should consider waiting for clearer signs of recovery before investing in this Zacks Rank #5 (Strong Sell) stock.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NIKE, Inc. (NKE): Free Stock Analysis Report Skechers U.S.A., Inc. (SKX): Free Stock Analysis Report lululemon athletica inc. (LULU): Free Stock Analysis Report Adidas AG (ADDYY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks