Nike’s stock has plummeted after a forecast of an unexpected drop in annual sales intensified investor concerns about the sportswear giant’s efforts to counter market share losses to emerging brands like On and Hoka.
The stock experienced its worst day ever, falling 20 percent on Friday and erasing $28.41 billion from the company’s market valuation.
On Thursday, Nike projected a mid-single-digit percentage decline in fiscal 2025 revenue, in contrast to analysts’ expectations of a nearly 1 percent increase.
“Nike is at a point where they want to put out the most conservative guidance they can, setting the bar low for themselves and hopefully beating it,” said Art Hogan, chief market strategist at B Riley Wealth.
The forecast also affected shares of competitors and sportswear retailers across Europe, the United Kingdom, and the United States on Friday.
British sportswear retailer JD Sports closed 5.4 percent lower on Friday, while Germany’s Puma fell 1 percent. Adidas shares saw a slight increase.
“Nike’s been under pressure for a couple of years now. They have an opportunity now that the valuation’s been reset extremely low to start gaining some sponsorship, but this will not be happening immediately,” Hogan added.
Nike’s US market share in the sports footwear category decreased 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 like Hoka, Asics, New Balance, and On accounted for 35 percent of the global market share in 2023, up from 20 percent during the 2013-2020 period, according to a June RBC research report.
To combat the sales decline, Nike has cut back on oversupplied brands such as Air Force 1 as part of a $2 billion cost-cutting plan initiated late last year.
The company is also updating its product lineup, introducing new sneakers priced under $100 in various countries to attract price-conscious consumers.
This year, Nike will also release an Air Max version and Pegasus 41 with a full-length foam midsole made from ReactX to enhance sustainability.
“This is still Nike, and we expect their size and scale to prove a long-term competitive advantage, but the burden of proof is on management execution at this point,” said BMO Capital Markets analyst Simeon Siegel.
Management Shake-up?
The underperformance over the past year has led some Wall Street analysts to speculate about a potential 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 a leadership change is very much needed.”
CEO John Donahoe is in his fourth year of a five-year commitment as Nike’s top executive. The former eBay CEO, who succeeded Mark Parker, was hired to strengthen the company’s digital sales channels.
“I have seen Nike’s plans for the future and wholeheartedly 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 lowered their price targets.
