NIKE shares slumped 18.6 per cent in early trade on Friday (Jun 28) 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 per cent rise, dragging shares of rivals and sportswear retailers across Europe, UK and US on Friday.
British sportswear retailer JD Sports fell as much as 6.6 per cent and Germany’s Puma lost 3 per cent, while Adidas edged lower after briefly rising nearly 2 per cent.
If current losses hold, Nike’s shares were set for their worst day in more than two decades and wipe out nearly US$27 billion in market value.
“Nike shares are headed for a stay in the proverbial penalty box until new product innovations actually 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 US$2 billion cost-cutting plan launched late last year.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Nike is set to roll out this year an Air Max version and Pegasus 41 with full-length foam midsole made from ReactX to boost sustainability, responding to concerns over stagnating innovation.
Sporting goods brands, such as Hoka, Asics, New Balance and On, accounted for 35 per cent of global market share in 2023, compared to the 20 per cent held over the 2013-2020 period, according to a RBC research report released in June.
Nike’s US market share in the sports footwear category fell to 34.97 per cent in 2023 from 35.37 per cent in 2022, and 35.40 per cent 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 underperformance over the past year has led to some Wall Street analysts raising the possibility of a management shake-up ahead of 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. REUTERS
