Nike shares have plunged as a forecast 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. like On and Hoka.
It was the worst day ever for the stock, which fell 20 percent on Friday, and the losses wiped $28.41 billion off the company's market valuation.
On Thursday, the company had projected a mid-single percentage drop in fiscal 2025 revenue, compared with analyst estimates of an increase close to 1 percent.
“Nike is at a point where they want to offer the most conservative guidance possible, so they set a low bar and hopefully it's a bar they can clear,” said Art Hogan, chief market strategist at B Riley Wealth.
His forecast dragged down shares of rivals and sportswear retailers in Europe, Britain and the United States on Friday.
British sportswear retailer JD Sports lost 5.4 percent at the close on Friday, while Germany's Puma fell 1 percent. Adidas shares rose slightly.
“Nike has been under pressure for a couple of years. I certainly think they have an opportunity now that the valuation has 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 percent in 2023 from 35.37 percent in 2022 and 35.4 percent in 2021, according to GlobalData.
Meanwhile, other sporting goods brands such as Hoka, Asics, New Balance and On accounted for 35 percent of the global market share in 2023, compared to 20 percent during the 2013-2020 period, according to a report. RBC Research Report from June.
To stem a worsening sales slump, Nike has cut supplies of oversupplied brands including Air Force 1 as part of a $2 billion cost-cutting plan launched late last year.
The sportswear giant is also shifting 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 boost sustainability.
“This is still Nike, and we expect its size and scale to demonstrate a long-term competitive advantage, but the burden of proof [is] on management execution right now,” said Simeon Siegel, an analyst at BMO Capital Markets.
Management restructuring?
Last year's poor performance has led some Wall Street analysts to raise the possibility of a management shakeup ahead of the company's investor day this fall.
“In retail, if you have two bad quarters, you're usually out,” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
“I think it [a leadership change] It is very necessary.”
Chief Executive John Donahoe is in the fourth year of a five-year commitment as Nike's top boss. The former eBay chief executive, who succeeded Mark Parker, was brought in to focus on strengthening the company's digital sales channel.
“I have seen Nike’s plans for the future and I truly believe in them. I am optimistic about Nike’s future and John Donahoe has my unwavering confidence and full support,” said Phil Knight, co-founder and chairman emeritus, in a statement.
At least six brokerages downgraded the stock and 15 cut their price targets.
