Nike Faces Major Setback as Shares Plummet 18.6% Amid Annual Sales Forecast Drop

Nike shares dropped 18.6% amid a bleak annual sales forecast, raising investor concerns. The company anticipates a mid-single-digit revenue fall for fiscal 2025, contrary to analysts' expectations. This decline also impacted other sportswear brands like JD Sports, Puma, and Adidas. Analysts suggest new product innovations and management changes are essential for recovery.

Nike shares slumped 18.6% in early trade on Friday as a forecast for a surprise drop in annual sales amplified investor concerns about the pace of the sportswear giant's efforts to stem market share losses to upstart brands such as On and Hoka. The company on Thursday projected 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 edged lower after briefly rising nearly 2%. If current losses hold, Nike's shares were set for their worst day in more than two decades and wipe out nearly $27 billion in market value.

"Nike shares are headed for a stay in the proverbial penalty box until new product innovations actually start to manifest themselves and management regains investor trust," Wedbush analyst Tom Nikic said in a note. To be sure, Nike has cut back on oversupplied brands including Air Force 1 to curb a worsening sales decline as part of a $2 billion cost-cutting plan launched late last year.

Nike is set to roll out this year an Air Max version and Pegasus 41 with full-length foam midsole made from ReactX to boost sustainability, responding to concerns over stagnating innovation. Sporting goods brands, such as 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. "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.

MANAGEMENT SHAKEOUT? The underperformance over the past year has led to some Wall Street analysts raising the possibility of a management shake-up ahead of the company's investor day this fall.

"In retail, if you have two bad quarters, 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 commitment as Nike's top boss. The former eBay CEO, 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 wholeheartedly believe in them. I am optimistic in Nike's future and John Donahoe has my unwavering confidence and full support," Phil Knight, co-founder and chairman emeritus, said in a statement.

At least six brokerages downgraded the stock and 15 cut their price targets.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)