Nike Loses Footing: Shares See Biggest Fall Since 2001 on Weak Forecast
Nike Inc. (NYSE: NKE), the world’s largest sportswear company, has announced a gloomy outlook for its current fiscal year, projecting a 10% decline in sales in its current quarter from soft sales in China and what it called “uneven consumer trends” in most markets. Analysts had expected the drop to be at only 3.2%
The news has sent shockwaves through the market, with Nike’s shares plummeting as much as 18% on Friday morning, marking its biggest drop since 2001 — the drop will wipe out about $27 billion of Nike’s market value. The stock has fallen to the March 2020 low.
The company’s fourth-quarter results have raised concerns about waning demand and increasing competition from emerging brands like On (NYSE: ONON) and Deckers Outdoor Corp.’s (NYSE: DECK) Hoka, as well as traditional rival Adidas AG (ETR: ADS).
Nike’s revenue for the quarter fell 1.7% to $12.6 billion, missing analyst estimates. Particularly noteworthy was the performance of its Converse subsidiary, which saw an 18% drop in revenue due to weak sales in North America and Western Europe.
CEO John Donahoe, who took the helm in January 2020, is facing mounting pressure as the company struggles to produce hot-selling footwear to replace popular lines such as Air Force 1 and Dunk sneakers. The company’s recent strategy of prioritizing its own sales channels has not yielded the expected profits and growth, leading to layoffs and other cost-cutting measures.
Nike’s current challenges contrast sharply with the trajectory of Adidas, whose new CEO Bjorn Gulden has embraced retail partnerships and accelerated new product introductions, fueling a new era of growth for the German sportswear giant.
Nike CFO Matt Friend acknowledged that a comeback of this scale takes time, but cautioned that shifting the product lineup would impact sales in the short term.
The company plans to accelerate the release of new franchises in fitness and lifestyle categories in the latter half of this fiscal year, with more new products slated for the next couple of years.
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