Shares of Nike Inc. sank 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 rival Adidas AG.
The world’s largest sportswear company expects a single-digit revenue decline in the current fiscal year, which began this month. Analysts expected growth of around 2% this year, according to estimates compiled by Bloomberg.
Shares fell as much as 18% on Friday morning, the biggest drop in Nike since 2001. By 9:35 a.m., the crash had wiped out nearly $23 billion in market value. Shares had already fallen 17% in the past 12 months.
Other sports retailers such as JD Sports Fashion Plc and Cougar They were dragged down. adidas rose early Friday in Frankfurt, but the stock later erased the gain.
After years of dominance, Nike is struggling to produce hot-selling footwear to replace bestsellers like the Air Force 1 and Dunk sneakers. Worsening results increase pressure on the John Donahoe CEOHe has resorted to layoffs and other downsizing measures after an initiative to prioritize Nike’s own sales channels failed to produce promised levels of profits and growth.
In recent years, Nike It has also reduced its dependence on retail partners, who in turn have begun to push rival brands. The wave of competition from newer brands, such as On Holding AG and Hoka, from Deckers Outdoor Corp.pushed Nike to promise that it would prioritize sports, new products and wholesale partners.
The trajectory contrasts with that of Adidaswhose new CEO, Bjorn Guldenhas once again opted for retail partners and has accelerated the introduction of new products, such as the retro sneaker Sambawhich has become a success and has fueled a new era of growth. It has also sharpened the company’s focus on athletic performance.
The income of Nike In the fourth quarter they fell 1.7%, to $12.6 billion, below the average of analysts’ estimates. The subsidiary Chatknown for its sneakers Chuck Taylorwas the biggest laggard, as its revenue fell 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 head of technology companies such as ServiceNow Inc. and eBay Inc. Before that, he had spent nearly two decades at the management consulting firm Bain & Company Incwhere he became CEO in 1999.
Some analysts have criticized Donahoe’s leadership approach, with Sam Poser of Williams Trading recently arguing that current top executives of Nike They lack the “instinct and experience that the previous team had.”
That has 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, in which people fight to get their hands on the shoes and a company’s clothing.
That’s a stark difference from what the brand was experiencing for much of the last decade, during which it has basically doubled revenue from $25 billion in 2013 to more than $50 billion today. Although annual sales fell during the onset of the Covid pandemic in 2020, growth has otherwise been notable until recent quarters.
Now, company leaders are urging 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 bring in more new products over the next two years.
“A recovery of this magnitude takes time,” said the CFO. Matt Friend during the company’s meeting with analysts. But he warned that the change in product range will erode sales in the short term.
The executives of Nike They blamed the slowdown in part on lifestyle brands, including Air Force 1 and Nike DunksSales in this category fell for the first time since the start of the pandemic, when demand for casual clothing took off.
According to the analyst James Grzinicof Jefferies, these issues could lead to double-digit downgrades in analysts’ earnings expectations for the company this year and next. Furthermore, the era when European footwear company stocks followed Nike’s stock is crumbling.
Adidas is now the “sports brand of choice for global investors” as Nike and Lululemon Athletica Inc. losing momentum, Grzinic said in a note.
The weakness of the company’s own sales channels Nike It is also a “cause for concern as the sportswear giant could be alienating its core buyers due to the lack of novelty,” he said. Poonam Goyalanalyst Bloomberg Intelligence.
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