Nike Inc. shares dropped significantly after the company’s full-year outlook fell short of expectations, raising investor concerns about decreasing demand and rising competition from newer brands like On and Hoka, same as Adidas AG.
Nike, the world’s largest sportswear company, predicts a mid-single-digit decline in revenue for the current fiscal year, which started this month. According to Bloomberg estimates, analysts had anticipated about 2% growth this year.
On Friday morning, Nike’s shares plummeted by as low as 18%—the largest drop since 2001. By 9:35 a.m., this decline had erased approximately $23 billion in market value. Over the past 12 months, the stock had already fallen by 17%.
Other athletic retailers, including JD Sports Fashion Plc and Puma SE, were also negatively impacted. Although Adidas saw early gains on Friday in Frankfurt, those gains were later lost.
After years of market dominance, Nike is now struggling to produce new best-selling footwear to succeed popular models like the Air Force 1 and Dunk sneakers. This decline in performance increases the pressure on CEO John Donahoe, who has implemented layoffs and other cost-cutting measures after an initiative to focus on Nike’s direct sales channels did not yield the expected profits and growth.
In recent years, Nike cut its dependence on retail partners, who have started to promote competing brands. Competition from newer brands such as On Holding AG and Deckers Outdoor Corp.’s Hoka has forced Nike to promise a renewed focus on sports, new products, and wholesale partnerships.
This strategy contrasts with Adidas, where new CEO Bjorn Gulden has reinvigorated relationships with retail partners and accelerated the release of new products like the popular retro Samba sneaker. Gulden has also sharpened the company’s focus on athletic performance.
Nike’s fourth-quarter revenue decreased by 1.7% to $12.6 billion, missing the average analyst estimates. The Converse subsidiary, known for its Chuck Taylor sneakers, was particularly weak, with revenue dropping 18% due to poor sales in North America and Western Europe.
John Donahoe, who became Nike’s CEO in January 2020, previously led tech companies including ServiceNow Inc. and eBay Inc. Before that, he spent nearly two decades at the management consulting firm Bain & Company Inc., where he became CEO in 1999.
