In a significant blow to Nike and its affiliated retailers, shares of the athletic apparel giant plummeted by more than 10% on Friday following a downward revision of its revenue outlook for the fiscal year. Sneaker retailer Foot Locker, heavily reliant on Nike products, also felt the impact, with its shares declining over 4%.
Nike’s earnings report on Thursday revealed a revised revenue growth expectation of 1% for the fiscal year, a stark drop from the earlier forecast of mid-single digit growth. The company also announced plans to implement cost-cutting measures amounting to over $2 billion over the next three years.
The revised outlook is attributed to heightened challenges, particularly in Greater China and EMEA (Europe, the Middle East, and Africa), according to Nike’s finance chief, Matthew Friend. He cited factors such as digital traffic softness and a stronger U.S. dollar negatively impacting reported revenue in the second half compared to 90 days prior.
Analysts at TD Cowen expressed concerns, stating, “Nike needs improved marketing outside of basketball, streetwear, and lifestyle trends.” They downgraded the stock to “market perform” from “outperform,” highlighting that innovation in the higher end of Nike’s assortment is not resonating at scale, coupled with disruption from smaller competitors in footwear and apparel.
While Goldman Sachs analysts maintained their buy rating on Nike’s stock, they acknowledged the report provided “fodder for bears.” Slowing growth momentum, a more promotional competitive marketplace, and a comprehensive discussion on key franchise life cycle management were cited as factors that could weigh on Nike’s sales momentum in the future.
This setback for Nike underscores the evolving challenges in the athletic apparel industry and the need for strategic adjustments to navigate the current market dynamics.