Nike Inc. faces investor dismay as its full-year forecast falls short, amidst rising competition from new brands like On and Hoka, while Adidas gains traction.
United States, Bollywood Fever: Nike Inc. witnessed a significant decline in its stock prices after the company’s full-year projections failed to meet market expectations, highlighting concerns over diminishing demand and intensified competition from emerging rivals On and Hoka, as well as established competitor Adidas.
The world’s largest sportswear manufacturer anticipates a mid-single-digit revenue decrease in the current fiscal year, beginning this month. Analysts, as per Bloomberg estimates, had anticipated approximately 2% growth for the same period.
On Friday morning, Nike’s shares plummeted by as much as 18%, marking its most substantial drop since 2001 and resulting in the loss of billions in market capitalization. Over the past year, the stock had already experienced a 17% decline.
The downturn also affected other athletic retailers such as JD Sports Fashion and Puma, although Adidas initially saw gains in Frankfurt, Germany, before relinquishing them later in the day.
Nike, after years of dominance, is struggling to replicate the success of its iconic footwear like the Air Force 1 and Dunk sneakers. This underperformance has intensified pressure on its senior leadership.
CEO John Donahoe responded with layoffs and cost-cutting measures following disappointing results from Nike’s direct sales initiatives, which failed to deliver promised profitability and growth.
In recent years, Nike reduced its dependence on retail partners, a move that inadvertently boosted rival brands promoted by these partners. Increased competition from newcomers like On Holding and Deckers Outdoor Corp.’s Hoka prompted Nike to reaffirm its commitment to sports, innovation, and wholesale partnerships.
This strategy contrasts sharply with Adidas, where CEO Bjorn Gulden has reinvigorated relationships with retail partners and accelerated the launch of popular products like the retro Samba sneaker, driving substantial growth. Adidas has also sharpened its focus on athletic performance.
Nike’s fourth-quarter revenue declined by 1.7% to $12.6 billion, falling short of analyst expectations. Converse, particularly known for its Chuck Taylor sneakers, saw an 18% drop in revenue due to sluggish sales in North America and Western Europe.
Donahoe, who assumed leadership in January 2020 after years in technology firms like ServiceNow Inc. and eBay, faces criticism from analysts like Sam Poser of Williams Trading, who believes Nike’s current leadership lacks the instincts and experience of its predecessors.
Poser described Nike’s current strategy as being in a “push model,” where the company must actively market its products rather than enjoying natural consumer demand.
This situation contrasts with Nike’s performance over the past decade, where revenue nearly doubled from $25 billion in 2013 to over $50 billion today, aside from a brief dip during the COVID-19 pandemic in 2020.
Looking forward, Nike executives urge patience as the company plans to accelerate new product launches in fitness and lifestyle categories in the latter half of the fiscal year, with further releases planned over the coming years.
Chief Financial Officer Matt Friend emphasized that revitalizing the product lineup will impact short-term sales, urging stakeholders to exercise patience during this strategic pivot.
Nike executives attributed the slowdown partly to a decline in lifestyle brands such as Air Force 1 and Nike Dunks, whose sales contracted for the first time since the pandemic-induced surge in casual wear demand.
Analysts like James Grzinic of Jefferies anticipate significant downward revisions to Nike’s earnings forecasts for this year and the next, reflecting ongoing challenges. Grzinic noted a shift where European footwear brands like Adidas now outpace Nike and Lululemon Athletica Inc. in investor preference.
Bloomberg Intelligence analyst Poonam Goyal expressed concern over Nike’s faltering direct sales channels, suggesting potential alienation of core consumers due to lack of new product offerings.
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