What Happened?
Shares of athletic apparel brand Nike (NYSE: NKE) fell 8.5% in the pre-market session after the company reported third-quarter (fiscal 2025) results which came in soft, showing that the company's turnaround was still a work in progress. Sales continued to fall, and, margins shrunk underscoring ongoing challenges. Revenue, when adjusted for currency fluctuations, fell 7% year-over-year, a sharp contrast to flat growth in the same quarter last year.
Nike's focus on reviving its product portfolio and digital strategy had yet to translate into meaningful top-line growth, as weakness in its wholesale business (sales generated from retail partners Designer Brands, Hibbett, and JD Sports) and sluggish demand in North America weighed on sales. Despite the revenue weakness, Nike exceeded analysts' EPS expectations, benefiting from the ongoing share repurchase program, which helped offset some of the pressure on profits as gross margin fell due to higher promotional activity and unfavorable product mix.
Overall, the quarter fell short of expectations, with strong EPS results overshadowed by weak revenue trends and margin pressures.
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What The Market Is Telling Us
Nike’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 25 days ago when the stock gained 5.4% on the news that Jefferies analysts upgraded the stock's rating from Hold to Buy and raised the price target from $75 to $115. The analysts added "CEO Hill is tackling product and distribution issues head-on, positioning the brand to again outgrow the market and take back lost share. Survey work illustrates NKE's brand remains very strong, proving that issues were self inflicted and competitive threats less severe."
Nike is down 8.2% since the beginning of the year, and at $67.60 per share, it is trading 32.9% below its 52-week high of $100.82 from March 2024. Investors who bought $1,000 worth of Nike’s shares 5 years ago would now be looking at an investment worth $1,076.
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