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Nike shares fell on Friday after the world’s biggest sportswear maker by revenue warned its sales would fall this year, rocking retail stocks from JD Sports to Foot Locker.
Nike reported weaker-than-expected quarterly sales on Thursday and cut its outlook for next year, forecasting a mid-single-digit percentage decline due to slowing demand.
The earnings miss follows a protracted restructuring that management began in December, which also saw shares plummet after warnings of softening consumer demand.
The report of falling demand in Nike stores and online sent its shares down 20 percent in late morning trading on Friday, setting them on pace for their worst one-day drop since 2001. That led to a smaller drop in the retailer’s shares on the London Stock Exchange. JD Sports to American sports groups Foot Locker and Under Armour.
The news undermined confidence among Wall Street analysts, with one questioning whether the company’s best days were behind it.
“Nike has overexposed itself to mid-range trends that are being disrupted by more premium brands like Hoka, On, Lululemon and other newcomers that appeal to consumers,” wrote John Kernan, managing director at TD Cowen. in a note to clients.
“The concept of being all things to all consumers in this sector is virtually over and Nike’s management needs to change,” he added.
Matthew Friend, Nike’s chief financial officer, told analysts on a conference call Thursday that “it takes time to come back at this scale” and that the company has taken “aggressive” steps to reorganize inventory at Nike-owned stores and on its digital channel after seeing. a slowdown in demand for lifestyle products.
Nike’s direct-to-consumer revenue fell 8 percent to $5.1 billion in the three months ended May, while total revenue fell 2 percent to $12.6 billion.
Nike spent most of the year implementing a change in strategy and a $2 billion savings plan that was formulated in December. The move comes in the face of a previous reorganization that began before the Covid-19 pandemic to focus on direct and digital sales.
John Donahoe, Nike’s CEO, told analysts that “employee dimensions of savings to invest [plan] is behind us. And now those teams are focused on driving consumer innovation and execution.”
The 2024 turnaround follows a sweeping top-to-bottom reorganization Donahoe began in 2020 that shifted Nike away from divisions organized by individual sports, such as running and soccer, into strengths for men, women and kids, emphasizing higher margin sales. directly to consumers.
These efforts appear to have failed. Friend, Nike’s chief financial officer, said the company is now looking to regain market share and expand the “total market” rather than focusing on “one particular channel or the other.”
Jim Duffy, chief executive of Stifel, wrote that “Nike management’s credibility is at serious risk, and the potential for C-level regime change adds further uncertainty.”
In its latest quarter, Nike also reported a decline in Greater China, where its brick-and-mortar store traffic was down by “double digits” compared to the previous year, and “uneven” trends in Europe, the Middle East and Africa.
The company said it expects revenue to fall 10 percent this quarter and revenue to fall by a mid-single-digit percentage in fiscal 2025, which began in June.
Nike’s revenue was slightly below expectations last quarter as sales of its Converse brand fell 18 percent, but the company’s profit of 99 cents a share beat analysts’ estimates by nearly 20 percent. Year-on-year, sales fell 1.7 percent, while net profit rose 45 percent.