Nike shares (NYSE: NKE) slumped as much as 20.6% in afternoon trade on Friday and were on track for their worst day, as a forecast for a surprise drop in annual sales amplified investor concerns about the pace of the sportswear giant’s efforts to stem market share losses to upstart brands such as On and Hoka.
The company on Thursday projected a mid-single-digit percentage fall in fiscal 2025 revenue, compared to analysts’ estimates of a near 1% rise, dragging shares of rivals and sportswear retailers across Europe, the UK, and the U.S. on Friday.
British sportswear retailer JD Sports fell as much as 6.6%, Germany’s Puma lost 3%, while Adidas edged lower after briefly rising nearly 2%.
If current losses hold, Nike’s shares were set for their worst day in over two decades and wiped out nearly $27 billion in market value.
“Nike shares are headed for a stay in the proverbial penalty box until new product innovations start to manifest themselves and management regains investor trust,” Wedbush analyst Tom Nikic said in a note.
To be sure, Nike has cut back on oversupplied brands including Air Force 1 to curb a worsening sales decline as part of a $2 billion cost-cutting plan launched late last year.
Nike is launching the Air Max and Pegasus 41 with a full-length ReactX foam midsole this year to enhance sustainability and address concerns about stagnating innovation.
Sporting goods brands like Hoka, Asics, New Balance, and On held 35% of the global market share in 2023, up from 20% during 2013-2020, according to a June RBC research report.
Nike’s U.S. market share in the sports footwear category fell to 34.97% in 2023 from 35.37% in 2022, and 35.40% in 2021, according to GlobalData.
“They know where the problems are, but they’re having trouble right now generating demand and it is going to be a transition period that is going to take some time in different markets,” Morningstar analyst David Swartz said.
MANAGEMENT SHAKEOUT?
The past year’s underperformance has led some Wall Street analysts to suggest a potential management shake-up before the company’s investor day this fall.
“In retail, if you have two bad quarters, you’re usually out the door,” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
“I think it (a leadership change) is very much needed.”
CEO John Donahoe is in his fourth year of a five-year commitment as Nike’s top boss. The former eBay CEO, who succeeded Mark Parker, was hired to focus on strengthening the company’s digital channel sales.
“I have seen Nike’s plans for the future and wholeheartedly believe in them. I am optimistic in Nike’s future 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 cut their price targets.
(Source: ReutersReuters)
