Nike Shares Plummet Amid Market Share Battle

Nike shares dropped 15% in premarket trading, driven by a forecasted decline in annual sales. Investor concerns grew as new brands like On and Hoka gained market share. Analysts downgraded Nike stock, citing unclear growth trajectory. Nike aims to regain stability through a $2 billion cost-cut plan.

Nike shares slumped 15% in premarket trading on Friday as a forecast for a surprise drop in annual sales amplified investor concerns about the sportswear giant ceding more market share to upstart brands such as On and Hoka.

The company on Thursday forecast a mid-single-digit percentage fall in fiscal 2025 revenue, compared to analysts' estimates of a near 1% rise, dragging shares of rivals and sportswear retailers across Europe, UK and U.S. on Friday. British sportswear retailer JD Sports fell as much as 6.6% and Germany's Puma lost 3%, while Adidas briefly rose more than 1.5%.

"We think Nike's long-term growth and profitability trajectory is subsequently both unclear," Morgan Stanley analysts led by Alex Straton said, downgrading the company's stock to "equal-weight" from "overweight." Nike has cut back on oversupplied brands such as Air Force 1 to curb a worsening sales decline as part of a $2 billion cost cut plan launched late last year.

"They know where the problems are, but they're having trouble right now generating demand and it is going to be a transition period that is going to take some time in different markets," Morningstar analyst David Swartz said. Newer sporting goods brands, including Hoka, Asics, New Balance and On, accounted for 35% of global market share in 2023 compared to the 20% held over the 2013-2020 period, according to a RBC research report released in June.

Nike's U.S. market share in the sports footwear category fell to 34.97% in 2023 from 35.37% in 2022, and 35.40% in 2021, according to GlobalData. At least six brokerages cut their price targets on Nike. Nike's shares were trading at 25.13 times profit estimates while On and Deckers were trading at 37.41 and 31.13 times earnings expectations.

"This is still Nike and believe the right strategy could turn the business. But we're not convinced that strategy is presently in place," BMO Capital Markets analysts said.

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