Nike Falls After Earnings Beat, Plans to Continue Cutting Supply

Nike (NKE) stock fell in post-market trading Thursday on a fourth quarter earnings report that beat analysts’ expectations in the first report since the athletic apparel maker announced plans to cut about $2 billion in costs over the next three years.

The athletic apparel brand posted $12.4 billion in revenue, a slight increase from the year-ago period. Net income decreased to $1.2 billion, or earnings per share of 77 cents. However, income and revenue were above analyst estimates compiled by Visible Alpha.

Nike paid out about $562 million in dividends over the third quarter, a 6% increase from what it paid in the same quarter last year. The company bought back $866 million in stock during the quarter.

Nike’s cost-cutting plans may be paying off so far, as its gross margin increased by 150 basis points in the quarter to 44.8%.

Chief Financial Officer (CFO) Matthew Friend reportedly said during the company’s earnings call that Nike is projecting a low single-digit increase in revenue in the first half of the 2025 fiscal year as it plans to continue scaling back on supply as part of the cost-cutting measures. Nike reported $7.7 billion in inventory as of Feb. 29, down 13% compared to the same time last year.

Investors and analysts weren’t especially optimistic heading into Thursday’s earnings report, with analysts from Wedbush and Bank of America lowering their target prices to $115 and $120, respectively. Bank of America analysts said Nike needs to improve its profitability in some international regions like China They also said the brand’s sales could improve if it sees the bump Nike hopes for around the Summer Olympics later this year.

Nike stock rose about 0.6% in regular trading Thursday and briefly rose after markets closed before reversing course, dropping over 6% by 6 p.m. Nike is down 6.3% so far this year, and more than 16% in the last 12 months.