Nike shares fell as forecasts of a surprise drop in annual sales amplified investor concerns about the pace of the sportswear giant’s efforts to stem market share losses to emerging brands such as On and Hoka.
It was the worst day ever for the stock, which fell 20 percent on Friday, with the losses wiping $28.41 billion off the company’s market valuation.
On Thursday, the company had projected a mid-single-digit percentage drop in fiscal 2025 revenue, compared with analyst estimates of a nearly 1% increase.
“Nike is at a point where they want to put out the most conservative guidance possible so they are setting low standards for themselves and hopefully it’s a standard they can surpass,” said Art Hogan, chief market strategist at B Riley. Fortune.
His prediction dragged down shares of rivals and sportswear retailers across Europe, the UK and the US on Friday.
British sportswear retailer JD Sports lost 5.4 percent at Friday’s close, while Germany’s Puma fell 1 percent. Adidas shares rose marginally.
“Nike has been under pressure for a few years. I certainly think they have an opportunity now that the valuation has been reset to an extremely low level to start getting some sponsorship, but that’s just not going to happen today or this week,” Hogan added.
The company’s U.S. market share in the athletic footwear category fell to 34.97% in 2023, from 35.37% in 2022 and 35.4% in 2021, according to GlobalData.
Meanwhile, other sporting goods brands such as Hoka, Asics, New Balance and On accounted for 35% of the global market share in 2023, compared to 20% during the 2013-2020 period, according to a research report. from RBC in June.
To stem a worsening sales decline, Nike reduced the number of oversupplied brands, including the Air Force 1, as part of a $2 billion cost-cutting plan launched late last year.
The sportswear giant is also tweaking its product line to launch new sneakers priced at $100 or less in countries around the world to appeal to price-conscious consumers.
It will also release an Air Max and Pegasus 41 version this year with a full foam midsole made from ReactX to increase sustainability.
“This is still Nike, and we hope its size and scale will provide a long-term competitive advantage, but the burden of proof [is] in the execution of management at this time”, said Simeon Siegel, analyst at BMO Capital Markets.
Shaken in management?
Poor performance over the past year has led some Wall Street analysts to raise the possibility of a management change ahead of the company’s investor day this fall.
“In retail, if you have two bad quarters, you are usually out of business,” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
“I think that [a leadership change] It’s very necessary.”
CEO John Donahoe is in the fourth year of a five-year appointment as Nike’s top boss. The former CEO of eBay, who succeeded Mark Parker, was hired to focus on strengthening sales across the company’s digital channels.
“I have seen Nike’s plans for the future and I believe in them with all my heart. I am optimistic about the future of Nike and John Donahoe has my unwavering confidence and full support,” Phil Knight, co-founder and chairman emeritus, said in a statement.
At least six brokerages downgraded the stock and 15 lowered their price targets.
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