Athletic apparel brand Nike (NYSE:NKE) beat Wall Street’s revenue expectations in Q4 CY2024, but sales fell by 7.7% year on year to $12.35 billion. Its GAAP profit of $0.78 per share was 23.3% above analysts’ consensus estimates.

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Company Overview

Originally selling Japanese Onitsuka Tiger sneakers as Blue Ribbon Sports, Nike (NYSE:NKE) is a global titan in athletic footwear, apparel, equipment, and accessories.

Footwear

Before the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Nike’s 3.7% annualized revenue growth over the last five years was sluggish. This was below our standard for the consumer discretionary sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Nike’s recent history shows its demand slowed as its revenue was flat over the last two years.

We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 1.2% year-on-year growth. Because this number aligns with its normal revenue growth, we can see Nike’s foreign exchange rates have been steady.

This quarter, Nike’s revenue fell by 7.7% year on year to $12.35 billion but beat Wall Street’s estimates by 2%.

Looking ahead, sell-side analysts expect revenue to decline by 2.8% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Nike has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 12.4% over the last two years, slightly better than the broader consumer discretionary sector.

Key Takeaways from Nike’s Q4 Results

We enjoyed seeing Nike exceed analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key metrics above expectations. The stock traded up 9.4% to $84.35 immediately following the results.

Indeed, Nike had a rock-solid quarterly earnings result, but is this stock a good investment here? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.