Nike Shares Plummet to 4-Year Low Amid Slowing Sales and Rising Competition
Nike Shares Plummet to 4-Year Low Amid Slowing Sales and Rising Competition
Nike’s stock suffered a major blow on Friday, plunging nearly 20% to its lowest point in over four years. The sneaker giant’s shares dropped 19.2% by 11 a.m. EDT, marking its steepest single-day decline since 2001 and the second-worst in the company’s 44-year history as a publicly traded entity.
The catalyst for the dramatic sell-off was Nike’s recent earnings report, which revealed a 2% decrease in quarterly sales ending May 31. The company also issued a cautious forecast, projecting a 10% year-over-year revenue decline – significantly worse than the 3% drop anticipated by analysts.
UBS analysts, led by Jay Sole, expressed concerns about (Nike Shares Plummet) Nike’s “fundamental trends” being more severe than previously understood. They downgraded the stock’s rating from “buy” to “neutral,” projecting a challenging road ahead for the company’s earnings.
Looking ahead, Nike is expected to report revenue and profit declines in its fiscal year ending May 2024, primarily due to struggles in its crucial Chinese market. The company’s sales in China are forecast to fall 10% below the record set in 2021.
This downward trend aligns with broader challenges faced by athletic apparel and footwear companies, including Lululemon, Adidas, and Under Armour. Multinational firms heavily reliant on sales in China, such as Apple, have also been impacted by the economic headwinds in the region.
The competitive landscape in the athletic sector has intensified, with Nike facing pressure from emerging competitors like Alo and Hoka. Goldman Sachs research indicated a consistent year-over-year decline in global search volumes for Nike products since last July, with a recent 10% drop in searches.
Jefferies analysts highlighted the impact of “rising competition” on Nike’s market dominance, further eroding investor confidence as reflected in the company’s lowest price-to-sales valuation since 2013.
On Friday alone, Nike’s market value plummeted by $27.5 billion, significantly impacting its standing compared to major industry peers like Adidas and Lululemon. Over the past three years, Nike’s stock has declined by 48%, including dividends, underperforming the S&P 500’s 34% return.
The repercussions of this market turmoil extended to Nike’s co-founder, Phil Knight, whose net worth diminished by $5.5 billion on Friday, marking the most substantial decrease among billionaires. With a 3% ownership stake in Nike, Phil Knight and his son Travis Knight were not immune to the company’s financial struggles, underscoring the widespread impact of Nike’s stock decline.
Despite the challenges, Evercore ISI analysts, led by Michael Binetti, maintained a “buy” rating for Nike, emphasizing the necessity for investors to exercise patience amid the ongoing turnaround efforts. However, the company’s ability to navigate the intensifying competition and economic headwinds will be crucial in determining its future trajectory.
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