Why Nike Stock Tumbled Today

Core Insights - Nike's shares declined by 9.1% following a fiscal second-quarter earnings report that beat estimates but provided disappointing guidance for the third quarter [1] - The company is undergoing a turnaround, but the guidance suggests that recovery may take longer than anticipated by investors [1] Financial Performance - Revenue for the quarter increased by 1% to $12.4 billion, surpassing the consensus estimate of $12.21 billion [3] - Wholesale revenue rose by 8% to $7.5 billion, while Nike Direct revenue fell by 8% to $4.6 billion [3] - Sales in China decreased by 17%, whereas North America revenue grew by 9%, indicating progress in turnaround efforts [3] Profitability Metrics - Gross margin decreased by 300 basis points to 40.6% due to higher tariffs [4] - Earnings per share dropped by 32% to $0.53, although this still exceeded estimates of $0.37 [4] Future Outlook - For the third quarter, Nike anticipates a revenue decline in low single digits, estimating around $11 billion, which aligns with seasonal trends [4] - The company expects gross margin to fall by 175-225 basis points in the upcoming quarter [4] Market Reaction - The market's reaction to the earnings report reflects concerns over the ongoing decline in profits and the cautious guidance provided by the company [5] - While the turnaround appears to be progressing, it may take several quarters before Nike returns to profit growth [5]