Nike Shares Slide After Surprise Q4 Loss Linked to Pandemic Store Closures

Nike says its current fiscal year 'will continue to be a time of uncertainty' but sees a 'significant' increase in revenue once the global pandemic eases.

Nike Inc.  (NKE) - Get Report shares slumped lower Friday after the world's biggest sports apparel company posted a surprise fourth-quarter loss as store closures linked to the global coronavirus pandemic hammered sales in Europe and North America.

Nike said revenues for the three months ending in May, its fiscal fourth quarter, fell 38% from last year to $6.3 billion , well shy of the Street consensus forecast of $7.3 billion. North American revenue halved, Nike said, to just $2.23 billion while sales in China held steady at $1.65 billion as stores re-opened over the quarter in the world's second largest economy.

Digital sales was the one bright spot, rising 79% from last year for the quarter and passing the $1 billion mark annually in both Europe and China. 

The overall sales slide, however, was matched by an 8.2% plunge in gross margins as the company cancelled purchase orders for the fall and holiday seasons. Nike also ceased wholesale shipments to north American retailers amid the peak of the pandemic. That helped push Nike into a loss of 51 cents a share for the quarter, or $790 million, with executives declining to offer a specific profit outlook for the current fiscal year.

"Given the uncertainty that still remains we will not be providing specific guidance, however, we expect to see sequential quarterly improvement in our financial results as retail reopens and each market normalizes supply and demand," CFO Matthew Friend told investors on a conference call late Thursday. "We expect revenue in the first half of the year to be below prior-year levels, but less of a decline than experienced in Q4 as we continue to reopen stores and fuel our digital business."

"We expect revenue in the second half to be up significantly versus the prior-year with a healthy marketplace and normalizing full-price sell-through across our channels," he added. "For the full fiscal year, we expect revenue to be flat to up versus prior-year."

Nike shares were marked 5.15% lower in early trading Friday to change hands at $96.18 each, a move that would push the stock into negative territory for the year.

"Although Nike will feel pandemic pressure, we expect it to go on the offensive, strategizing how to thrive post-COVID-19, rather than simply survive," said BMO Capital Markets analyst Simeon Siegel, who carries an outperform rating with a $100 price tag on the stock. 

"We expect Nike will feel dislocation; however, we also believe it best situated to grab others' share through the havoc; with share opportunity increasingly shifting from athletic peers to further include traditional apparel dollars," he added.