NYSE: NKE
Key Data Points
Nike (NKE 2.58%), a global athletic footwear and apparel brand, closed Friday’s session at $58.7, down 10.5%. Nike went public in 1980 and has grown roughly 32,570% since going public. Trading volume today reached 95.4 million shares, exceeding its three-month average by over 400%.
Friday’s trading reflected the fallout from Nike's earnings, as investors weighed the company's guidance, China demand, and margin trends.
How the markets moved today
The S&P 500 (^GSPC 1.18%) added 0.88% to finish at 6,835, while the Nasdaq Composite (^IXIC 1.46%) rose 1.31% to 23,308. Footwear and apparel industry peers, Adidas and Puma, slipped 1.32% to $96.46 and 2.26% to $2.60, respectively, underscoring the pressure from tariffs and shifting global demand.
What this means for investors
Nike reported earnings yesterday afternoon, with sales inching 1% higher and earnings per share dropping 32%. While these results met analysts' low expectations, Nike stock sold off anyway as its gross profit margins declined by 300 basis points, and its sales in China fell by 17%.
That said, there was one main reason to be optimistic about a turnaround in the earnings call. Wholesale revenue in North America increased by 20%, indicating that Nike is making significant progress in repairing relationships with its retail partners.
While a few Wall Street analysts called the quarter an inflection point for Nike, the stock still trades at 29 times free cash flow, so it isn't blatantly "cheap" yet, in my opinion. At this valuation, I'd rather see a return to growth before I invest.
