Ananya Mariam Rajesh and Juveria Tabassum reported on Friday that Nike’s stock took a significant hit, plummeting by 20%. This drop was fueled by a forecast indicating a surprise decrease in annual sales, sparking concerns among investors about Nike’s ability to compete with emerging brands like On and Hoka.
This decline marked the worst day ever for Nike’s stock, resulting in a loss of $28.41 billion from the company’s market valuation. The company’s projection of a mid-single-digit percentage decline in fiscal 2025 revenue, as opposed to analysts’ expectations of a 1% increase, further contributed to the negative sentiment surrounding Nike.
Art Hogan, chief market strategist at B Riley Wealth, noted that Nike may be intentionally setting conservative guidance to manage expectations and potentially exceed them. As a result of Nike’s forecast, shares of other sportswear retailers in Europe, the UK, and the US also saw declines.
In an effort to address its declining sales, Nike has implemented a $2 billion cost-cutting plan by reducing oversupplied brands like Air Force 1. Additionally, the company plans to introduce new sneakers priced at $100 and below to cater to budget-conscious consumers. Nike is also focusing on sustainability by launching products like the Air Max version and Pegasus 41 with a full-length foam midsole made from ReactX.
Despite the challenges, BMO Capital Markets analyst Simeon Siegel expressed confidence in Nike’s long-term competitive advantage, emphasizing the importance of strong management execution. However, some analysts have raised the possibility of a management shake-up following Nike’s underperformance over the past year.
CEO John Donahoe, who is in his fourth year at the helm, has faced scrutiny as Nike’s stock struggles. Nevertheless, co-founder and chairman emeritus Phil Knight voiced his support for Donahoe and expressed optimism in Nike’s future. Several brokerages downgraded Nike’s stock, with 15 reducing their price targets in response to the company’s forecast.