The Nike shares plunged this Friday after the sneaker company’s full-year outlook fell short of expectations, stoking investor concerns about declining demand and competition from new entrants. On and Hokaas well as its traditional rival Adidas.
The largest sportswear company in the world expects a single-digit decline in revenue in the current fiscal year, which began this month. Analysts They expected growth of around 2% this year, according to estimates compiled by Bloomberg.
Shares fell as much as 19%Nike’s biggest loss since 2001. In the morning, the collapse had wiped out nearly $23 billion in market value. The stock had already fallen 17% in the past 12 months.
Other sporting goods manufacturers, such as JD Sports Fashion and Puma were dragged down. Adidas rose early in Frankfurt on Friday, but the stock later erased the gain.
After years of dominance, Nike is struggling to find another hit to replace top-selling sneakers like the Air Force 1 and Dunk. Worsening results are adding to the pressure on CEO John Donahoe. He has turned to layoffs and other adjustment measures after an initiative to prioritize Nike’s own sales channels failed to produce promised levels of profits and growth.
In recent years, Nike has also reduced its dependence on retailers, which in turn have begun to push rival brands. The wave of competition from newer brands such as On Holding and Deckers Outdoor’s Hoka pushed Nike to promise to prioritize sports, new products and wholesale partners.
The trajectory contrasts with that of Adidas, whose new CEO, Bjorn Gulden, returned to betting on retail stores and accelerated the introduction of new products, such as the retro sneaker Sambawhich has become exit and has promoted a new era of growth. He has also sharpened the company’s focus on athletic performance.
Nike’s fourth-quarter revenue fell 1.7% to $12.6 billion, below the average of analysts’ estimates. The subsidiary Converseknown for its Chuck Taylor sneakers, was the most backward, since your income fell by 18% due to low sales in both North America and Western Europe.
Donahoe took over as CEO of Nike in January 2020, after many years at the helm of technology companies such as ServiceNow and eBay. Prior to that, he had spent nearly two decades at management consultancy Bain & Company, where he became CEO in 1999.
Some analysts have criticized Donahoe’s leadership approach. Sam Poser of Williams Trading recently argued that Nike’s current top executives lack the “instinct and experience that the previous team had.” That left Nike in a “push” model situation, Poser said, in which a company has to try to convince consumers to buy its products rather than the opposite scenario, where people fight to get their hands on a company’s shoes and apparel.
That’s a stark difference from what Nike has been experiencing for much of the last decade, during which it has basically doubled his income from $25 billion in 2013 to more than $50 billion today. While annual sales fell during the onset of the Covid pandemic in 2020, growth has been notable through recent quarters.
Now, Nike’s leaders they ask for patience as the company looks to accelerate the launch of new franchises in the fitness and lifestyle categories in the second half of this fiscal year and then launch more new products over the next few years.
“A return to this scale it takes time“Chief Financial Officer Matt Friend said during a call with analysts. But he cautioned that Changing the product line will erode sales in the short term.
Nike executives partly blamed the slowdown on brands. lifestyleincluding Air Force 1 and Nike DunksSales in the category fell for the first time since the start of the pandemic, when demand for casual clothing soared.
The problems could lead to double-digit reductions in analysts’ earnings expectations for the company this year and next, according to Jefferies analyst James Grzinic. Furthermore, the era in which European footwear companies’ stock market reactions followed Nike’s is crumbling.
Adidas is now the preferred sports brand worldwide for investors, while Nike and Lululemon Athletica lose momentum, Grzinic said. “The weakness of Nike’s own sales channels is also a cause for concern, as the sportswear giant could be changing the core of its buyers, who are turning away due to a lack of news,” said the Bloomberg Intelligence analyst. , Poonam Goyal.
