By Ananya Mariam Rajesh and Juveria Tabassum
(Reuters) -Nike shares fell 20% on Friday after forecasts for a surprise drop in annual sales fueled investor concerns about the pace of the sportswear giant’s efforts to counter market share losses from upstart brands such as On and Hoka to go, reinforced.
It was the worst day ever for the stock and the losses wiped $28.41 billion off the company’s market valuation.
The company on Thursday forecast a single-digit percentage decline in revenue in fiscal 2025, compared with analysts’ estimates of a nearly 1% increase.
“ Nike (NYSE:) is at a point where they want to give the most conservative guidance they can so they set the bar for themselves low and hopefully a bar they can beat,” said Art Hogan, chief market strategist at B Riley Richdom.
The forecast dragged down shares of rivals and sportswear retailers across Europe, the United Kingdom and the United States on Friday.
British sportswear retailer JD (NASDAQ:) Sports lost 5.4% on Friday, while Germany’s Puma fell 1%. Shares of Adidas (OTC:) rose marginally.
“Nike has been under pressure for a few years now. I certainly think they have a chance now that the valuation has been pushed extremely low to get some sponsorship, but that’s just not going to happen today or this week,” Hogan added.
The company’s U.S. market share in the athletic footwear category fell from 35.37% in 2022 to 34.97% in 2023 and 35.40% in 2021, according to GlobalData.
Meanwhile, other sporting goods brands such as Hoka, Asics, New Balance and On accounted for 35% of the global market share in 2023, up from 20% from 2013 to 2020, according to an RBC research report released in June.
To curb a worsening sales decline, Nike has cut back on oversupply of brands, including Air Force 1, as part of a $2 billion cost-cutting plan launched late last year.
The sportswear giant is also adapting its product lineup to roll out new $100 and under sneakers in countries around the world to appeal to price-conscious consumers.
This year, the company will also release an Air Max version and Pegasus 41 with a full-length foam midsole made from ReactX to increase durability.
“This is still Nike and we expect their size and scale to prove a long-term competitive advantage, but the onus is on management execution at this point,” said BMO Capital Markets analyst Simeon Siegel.
MANAGEMENT SWITCHOUT?
The underperformance of the past year has led some Wall Street analysts to raise the possibility of a management shake-up ahead of the company’s investor day this fall.
“If you have two bad quarters in retail, you’re usually out the door,” said Jessica Ramirez, senior analyst at Jane Hali & Associates.
“I think it (a leadership change) is very much needed.”
CEO John Donahoe is in his fourth year of a five-year stint as Nike’s top boss. The former CEO of eBay (NASDAQ:), who succeeded Mark Parker, was hired to focus on strengthening the company’s digital channel sales.
“I have seen Nike’s plans for the future and believe in them with all my heart. I am optimistic about Nike’s future and John Donahoe has my unwavering confidence and full support,” said Phil Knight, co-founder and chairman emeritus, in a statement.
At least six brokerages downgraded the stock and 15 lowered their price targets.
