It was the worst day on record for the stock, with losses wiping $28.4 billion from Nike’s market valuation.
Nike shares plunged as expectations of a surprise decline in annual sales heightened 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 in the stock’s history, falling 20% on Friday, with losses wiping $28.41 billion off the company’s market valuation.
On Thursday, the company had forecast a decline of about 1% in its revenue for the 2025 fiscal year, while analysts had estimated an increase of nearly 1%.
“Nike is at a point where they want to release 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,” he said. said Art Hogan, chief market strategist at B Riley. Wealth.
Its predictions led to actions from competitors and sportswear retailers across Europe, the UK and the US on Friday.
British sportswear retailer JD Sports fell 5.4 percent at Friday’s close, while Germany’s Puma fell 1 percent. Shares in Adidas edged higher.
“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 the growing decline in sales, Nike has been reducing its inventory of overproduced brands, including Air Force 1s, as part of a $2 billion cost-cutting plan launched late last year.
The sportswear giant is also changing its product lineup to launch new sneakers priced at $100 and under in countries around the world to appeal to price-conscious consumers.
It will also launch this year an Air Max version and a Pegasus 41 with a full-length ReactX foam midsole to boost 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.
A management shake-up?
The underperformance over the past year has led some Wall Street analysts to raise the possibility of a management shakeup before the company’s investor day this fall.
“In retail, if you have two bad quarters, you’re usually out,” said Jessica Ramirez, principal 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 commitment 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 I believe in them wholeheartedly. I am optimistic about the future of Nike and John Donahoe has my full trust and support,” Phil Knight, co-founder and chairman emeritus, said in a statement.
At least six brokerages downgraded the stock and 15 reduced their price targets.
News Source : www.aljazeera.com
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