Nike Stock Slumps as Morningstar Warns of Prolonged Recovery

Nike's stock price is headed for its first weekly loss in recent weeks as Morningstar analysts warn that the company's turnaround efforts are taking longer than expected. The sportswear giant launched a cost-cutting plan, dubbed 'Pace', which aims to save $2.5 billion, but weaker sales and challenges in China have raised concerns about the company's recovery.

Nike reported a 4% year-over-year drop in Q1 sales, with Greater China sales falling by 22%. Morningstar analyst David Swartz said that while Nike has made progress in reducing costs, its revenue and profit growth remain sluggish. The company now expects a full-year sales decline of high single digits, steeper than previously anticipated.

Swartz noted that Nike's gross margin rose by 60 basis points to 42.8%, thanks to lower shipping and logistics costs. However, general and administrative expenses dropped by 3% as the company kept spending under control despite higher sports marketing costs.