Nike shares fell as forecasts 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 such as On and Hoka.
It was the worst day on record for the stock, which fell 20 percent on Friday, with losses wiping $28.41 billion off the company’s market valuation.
On Thursday, the company had forecast a single-digit percentage decline in its 2025 revenue, compared with a nearly 1% increase estimated by analysts.
“Nike is at a point where they want to put out the most conservative guidance possible, so they’re setting a very low bar for themselves and I hope it’s a bar they can beat,” Art Hogan, chief market strategist at B Riley, told Wealth.
His forecasts led to declines in shares of competitors and sportswear retailers in Europe, the United Kingdom and the United States on Friday.
British sportswear retailer JD Sports lost 5.4 percent at Friday’s close, while Germany’s Puma fell 1 percent. Adidas shares rose slightly.
“Nike has been under pressure for a few years now. I think they certainly have the opportunity, now that the valuation has been brought down to an extremely low level, to start getting sponsors, but it’s not going to happen today or this week,” Hogan added.
According to GlobalData, the company’s market share in the US athletic footwear category fell to 34.97% in 2023, from 35.37% in 2022 and 35.4% in 2021.
Meanwhile, other sporting goods brands such as Hoka, Asics, New Balance and On accounted for 35% of the global market share in 2023, up from 20% in the 2013-2020 period, according to a June RBC research report.
To curb its deepening sales decline, Nike has been cutting excess sales, including the Air Force 1, as part of a $2 billion cost-cutting plan launched late last year.
The sportswear giant is also tweaking its product lineup to roll out new sneakers priced at $100 and under in countries around the world to appeal to price-conscious consumers.
It will also release an Air Max version and a Pegasus 41 this year with a full-length ReactX foam midsole to enhance durability.
“This is still Nike, and we expect their size and scale to be a long-term competitive advantage, but the burden of proof is on management’s execution at this point,” said Simeon Siegel, analyst at BMO Capital Markets.
Management reshuffle?
Last year’s underperformance 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 on the sidelines,” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
“I think (a change in leadership) is absolutely necessary.”
CEO John Donahoe is in his fourth year of a five-year stint at the helm of Nike. The former eBay CEO, who succeeded Mark Parker, was hired to focus on strengthening sales across the company’s digital channels.
“I have seen Nike’s plans for the future and believe in them wholeheartedly. I am optimistic about the future of Nike and John Donahoe has my full confidence and support,” Phil Knight, co-founder and chairman emeritus, said in a statement.
At least six brokerages have downgraded the stock and 15 have cut their price targets.
