Nike Inc. (NKE) shares plunged by 20 percent on Friday after the company decreased its full-year guidance. Although the fiscal fourth quarter results reported on Thursday showed an increase in earnings, sales fell below expectations.

It also reported full year ended on May 31, 2024. The sneaker and apparel giant expects sales to fall throughout the year.

Nike posted adjusted earnings per share of $1.01, while LSEG surveyed analysts had expected an EPS of 83 cents. Despite the increase in earnings, the company posted revenue of $12.61 billion, while analysts estimated revenue to be higher at $12.84 billion.

In its press release, Nike said its full-year revenues were $51.4 billion and mentioned that its prior-year revenue was $51.2 billion, an increase of one percent on a currency-neutral basis.

For the fourth quarter, it said that revenues were $12.6 billion, with a decrease of two percent on a reported basis. It also noted that revenues were flat on a currency-neutral basis.

In fiscal 2024, Nike distributed dividends of $2.2 billion to its shareholders and repurchased shares worth $4.3 billion.

Nike executives said the fall in sales was due to several factors, some of which were the general decline in the lifestyle business. Online performance did not meet expectations due to the more significant number of lifestyle products.

There were also lower sales in classic franchises, including Air Force 1. Sales in China were also slow as the region faced a decline in retail sales across industries.

Nike changed its focus to direct sales, but this has not brought the expected rise in sales and revenues. Despite higher profit margins, it faced logistic challenges.

Nike has accepted its overreach in direct sales. It has brought back sales through wholesale stores, including FootLocker. It also looks forward to innovations as it cuts down stock on classic brands and brings innovations. CWEB thinks that these are positive steps taken by the sneaker brand.

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