Investing.com - Nike (NYSE:NKE) reported second-quarter results that beat analysts' expectations, but the sportswear giant tempered expectations, warning of a softer second-half outlook for revenue as it looks to streamline operations to cut costs.
Nike Inc (NKE) shares fell as much as %12 in early Friday trade following the report.
Nike announced EPS of $1.03 on revenue of $13.4 billion. Analysts polled by Investing.com anticipated EPS of $0.84 on revenue of $13.39B.
The beat was driven by an improvement in margin, underpinned by "strategic pricing actions and lower ocean freight rates, partially offset by unfavorable changes in net foreign currency exchange rates and higher product input costs," the company said.
Gross margin for the fourth quarter increased 170 basis points to 44.6%.
The company also detailed cost-cutting plans, targeting up to $2B in cost savings over three years that will result in $400-450M in pre-tax charges that would mostly be recognized in the third quarter of fiscal year 2024.
Looking ahead, the company warned of a softer second-half revenue outlook, adding that it remained "focused on strong gross margin execution and disciplined cost management."
On the earnings call, the management expects full-year revenue to grow approximately 1%, compared to a prior outlook of up mid-single digits. The consensus was looking for growth of 4%.
"This new outlook reflects increased macro headwinds, particularly in Greater China and EMEA," CFO Matthew Friend said.
In response to the new guidance, analysts at TD Cowen downgraded the rating to Market Perform from Outperform.
"Consensus estimates are too high on a multi-year basis and the next innovation cycle is already modeled in 2025 recovery estimates. Nike needs increased and improved marketing investments while HOKA, On and lululemon (NASDAQ:LULU) are scaling further with increased customer acquisition and retention," analysts said.
Analysts at Jefferies lowered the price target by $10 to $110 per share and reiterated a Hold rating.
"The more subdued top-line outlook is likely to be the focus, and we believe shares will have difficulties breaking out from current levels."
Additional reporting by Louis Juricic