Nike forecasts a high-single-digit sales drop and earnings of $1.15 to $1.35

Nike said Thursday it expects sales to fall by a high-single-digit percentage in the fiscal year through May, and adjusted earnings of $1.15 to $1.35 a share. Analysts had expected $1.66. The range leaves out about $0.15 a share of costs from a restructuring Nike calls Pace.

Revenue in the quarter ended August 31 was $11.2 billion, down 4% from a year earlier, against the $11.32 billion analysts had expected. Earnings were $0.48 a share, beating the $0.43 analysts had expected, and down from $0.49 a year earlier.

Greater China was the weakest region. Sales there were $1.18 billion, down 22%. Excluding currency moves, the drop was 26%.

Online sales fell 13%, after a 12% drop in the same quarter a year ago, while sales to other retailers were down 1%. North America, Nike's largest region, grew 2%. Europe, the Middle East and Africa fell 5%, and Converse fell 28%.

The full-year outlook

In June, Nike said sales would fall by a low- to mid-single-digit percentage in the first half. The first quarter's 4% drop was inside that range. The new forecast covers the full year, and a high-single-digit decline is steeper than that first-half range.

Last fiscal year, revenue was $46.4 billion. Analysts had expected $45.31 billion this year, a decline of about 2.3%. A high-single-digit drop is usually read as roughly 7% to 9%. At 7%, the mild end of that reading, sales would be about $43.2 billion, short of that $45.31 billion.

Going into Thursday, analysts expected sales to bottom in the first half and to be roughly flat in the second half. A high-single-digit drop for the full year does not fit that path. If the first half stays inside the June range, the back half has to fall faster than the front.

Nike gave no figure for the second quarter and none for gross margin. Ahead of Thursday, it had been expected to wait until an investor day this fall before giving a full-year number.

"We have more work to do in NIKE Sportswear, Jordan Brand and Greater China, and we're taking deliberate actions to strengthen those businesses the right way for the long-term," chief executive Elliott Hill said.

The shares closed at $35.15, down 0.7% in the regular session, before the results. After the close they were at $33.78 as of 4:42 p.m. Eastern, 3.9% under that close and below the lowest regular-session price of the past year, $35.02. The share price is down about 45% this year.

Nike was the smallest stock in the Dow as of Thursday, September 17, at 0.4% of the index, so a fall in the shares barely shows up in ADIA, the fund that tracks the Dow. S&P Dow Jones Indices removed Nike from the S&P 100 before the open on Monday, September 21.

Management is scheduled to take questions at 5 p.m. Eastern. How China, tariffs and discounting fit the forecast is for that call, and for the investor day Nike set for Monday, November 16, and Tuesday, November 17.