Shares of apparel company Nike (NYSE:NKE) nosedived on Friday after the company reported its latest earnings numbers. The company’s products are expensive and with inflation still weighing on consumers, Nike’s numbers haven’t been looking all that great.
In its fourth quarter, which ended on May 31, Nike reported revenue of $12.6 billion, which fell 2% year over year. The company saw declines in multiple markets, including North America, its largest, where sales declined by 1%. In the earnings release, CEO John Donahoe said that the company is “taking our near-term challenges head-on.” Management says it is working on become more competitive and to be in a better position to generate long-term profit growth. And while the company has been slashing costs, investors may have been expecting more top-line growth from the business.
With consumers cutting back on spending, it may not get a whole lot easier moving forward for Nike to grow its business without having to slash prices. And investors don’t appear to be convinced it will be an easy path, and that Nike is worth paying a premium for. Last week’s selloff sent the stock to a new 52-week low, and to levels the stock hasn’t been at since 2020.
Nike has a strong brand which resonates with young people but it may take a while for investors to rally around the stock again as it needs to show it can find a way to continue to grow. If you’re willing to be patient and ride it out, however, now may be a good time to buy the stock given all the bearishness which appears to be priced into its current valuation.
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