What happened

Shares of Nike (NKE -0.34%) were falling today after the sportswear giant's fiscal fourth-quarter results weren't enough to please investors.

As a result, the stock was down 2.7% as of 12:45 p.m. ET on Friday.

So what

Nike's results were essentially in line with estimates, but its guidance indicated that sluggish growth would persist into fiscal 2024.

Revenue in the fourth quarter rose 5%, or 8% in constant currency terms, to $12.8 billion, which was better than the consensus at $12.59 billion. Nike Direct continued to deliver strong results, with revenue up 15% to $5.5 billion, a reflection of the company's shift away from the wholesale channel as it generally captures higher profit margins in the Nike Direct channel. Wholesale revenue fell 2% in the quarter to $6.7 billion.

Gross margin was down 140 basis points to 43.6% due to higher input costs and increased markdowns, while inventories were flat, showing the company improved its inventory position after earlier supply chain challenges.

Because of the lower gross margin and an 8% increase in selling and administrative expenses, operating income fell 17% in the quarter to $1.22 billion. And, after it lapped an income tax benefit in the quarter a year ago, earnings per share dropped 27% to $0.66, just short of estimates at $0.67.

Still, management seemed pleased with the steady top-line growth and performance in Nike Direct as CEO John Donahoe said: "Nike's strong results make clear that our strategy is working. [Fiscal year 2023] was a milestone year for Nike as our unique advantages continue to drive competitive separation."

Now what

Looking ahead, the company offered mixed guidance for 2024, saying it expects mid-single-digit revenue growth for the full year and flat to low-single-digit revenue growth in the first quarter. It also called for gross margin expansion of 140 to 150 basis points for the year, implying earnings per share in the range of $3.75 to $3.95, which is in line with estimates at $3.86 and up from $3.23 in fiscal 2023.

However, Nike stock is expensive, trading at a forward price-to-earnings ratio close to 30. Given the modest top-line growth expected this year, the stock's upside seems limited for the near term.