Nike Tumbles After Warning That Sales Slump Is Getting Worse

27/06/2024

Nike store in Berlin

(Bloomberg) -- Nike Inc. fell after the world’s largest sportswear company issued a full-year outlook that missed expectations, reinforcing investor concerns about waning demand for the brand’s sneakers and apparel.

The owner of the Jordan and Converse brands sees revenue declining in the mid-single digits in the company’s current fiscal year, which began this month. Analysts had expected growth of about 2% this year, according to estimates compiled by Bloomberg. Much of the sales miss will be due to a weak fiscal first quarter, when revenue is seen dropping 10%, deeper than expected.

“A comeback at this scale takes time,” Chief Financial Officer Matt Friend said during the company’s call with analysts. He added the company is transitioning its product lineup to reignite consumer interest.

The shares extended their decline in late New York trading Thursday. If the 11% decline in postmarket trading holds, Nike will be set for its biggest drop since late December, when it announced $2 billion in cost cuts. The stock has declined 13% this year through Thursday’s close.

Revenue in the company’s fiscal fourth quarter ended May 31 fell 1.7% to $12.6 billion, missing the average of analyst estimates. Sales in the important Greater China market was $1.86 billion, beating the average estimate, while earnings per share also surpassed expectations.

The results show the weakness Nike has reported in recent quarters is persisting as the company retrenches after an attempted refocus on its own sales channels failed to produce the desired results. Those sales, via the company’s website, app and stores, declined 8%, short of Wall Street’s expectations. Converse, known for its Chuck Taylor sneakers, saw revenue plummet 18% due to soft sales in both North America and Western Europe.

Bloomberg Intelligence analyst Poonam Goyal said the underperformance at Nike’s own sales channels “comes by surprise and is a reason for concern, as the activewear giant could be turning its core shoppers away due to lack of newness.” She added that the performance in wholesale, which beat estimates, is a “positive indicator for its revived and existing wholesale relationships.”

Nike Chief Executive Officer John Donahoe is cutting $2 billion in costs and slashing 2% of the workforce, with layoffs recently hitting the company’s European headquarters near Amsterdam and its Boston-based Converse brand.

Amid a wave of competition from upstarts such as On Holding AG and Deckers Outdoor Corp.’s Hoka running shoes, Donahoe has said he’ll prioritize sports, new products and wholesale partners that had largely received less attention from the company as it sought to boost its own stores and websites.

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