Ananya Mariam Rajesh
(Reuters) – Nike shares fell 20.6% in afternoon trading on Friday and were on track for a worse day as the forecast of a surprise drop in annual sales fueled investor concerns about the pace of the sportswear giant’s efforts to rein in the market. share losses with up-and-coming brands like On and Hoka.
The company on Thursday forecast fiscal 2025 revenue to decline by a mid-single-digit percentage, compared with analysts’ estimates of nearly 1% growth, sending shares of rivals and sportswear retailers lower in Europe, the U.K. and the U.S. on Friday.
British sportswear retailer JD (NASDAQ:) Sports fell 6.6%, Germany’s Puma lost 3%, while Adidas (OTC:) fell after briefly rising nearly 2%.
If current losses continue, Nike Shares (NYSE:) had their worst day in more than two decades and lost nearly $27 billion in market value.
“Nike’s stock will remain in the proverbial penalty zone until new product innovations begin to emerge and management restores investor confidence,” Wedbush analyst Tom Nikic said in a note.
Of course, Nike has trimmed its number of redundant brands, including the Air Force 1, to stem worsening sales declines as part of a $2 billion cost-cutting plan launched late last year.
This year, Nike is set to release versions of the Air Max and Pegasus 41 with a full-length foam midsole made from ReactX to boost sustainability and address concerns about stagnation in innovation.
According to an RBC research report published in June, 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.
Nike’s U.S. athletic footwear market share in the athletic footwear category fell to 34.97% in 2023 from 35.37% in 2022 and 35.40% in 2021, according to GlobalData.
“They know what the challenges are, but they’re having trouble creating demand right now, and it’s going to be a transition period that will take some time across different markets,” said Morningstar analyst David Schwartz.
CONTROL SHAKE?
The decline in performance over the past year has led some Wall Street analysts to speculate about the possibility of a change in management ahead of investor day this fall.
“In retail, if you have two bad quarters, you’re usually out the door,” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
“I think this (change of leadership) is very necessary.”
CEO John Donahoe is in his fourth year of five years as Nike’s top boss. Former eBay (NASDAQ:) CEO, who succeeded Mark Parker, was hired to focus on strengthening sales through the company’s digital channels.
“I have seen Nike’s plans for the future and I believe in them with all my heart. “I am optimistic about Nike’s future, and John Donahoe has my unwavering confidence and full support,” Phil Knight, co-founder and chairman emeritus, said in a statement.
At least six brokerages downgraded the stock and 15 cut their price targets.