Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Nike shares hit a five-year low on Friday as the sportswear group warned a global trade war and consumer caution were complicating its efforts to boost sales as part of a turnaround.
The company on Thursday evening forecasted a bigger than expected drop in revenue for the three months to May in a fresh setback as it seeks to recover market share ceded to longtime rival Adidas and upstart brands.
Nike shares dropped as much as 9.3 per cent in Friday morning trading on Wall Street, taking the group’s market capitalisation below $100bn. The stock recovered some of its losses to close down 5.5 per cent at a five-year low.
The drop was Nike’s biggest one-day share price fall in almost six months and ranks as one of its largest in the past five years.
Chief financial officer Matthew Friend on Thursday said Nike was battling “several external factors that create uncertainty in the current operating environment, including geopolitical dynamics, new tariffs, volatile foreign exchange rates and tax regulations”.
The company said it had enjoyed a strong holiday season but had suffered declining sales in its Jordan brand and a “double-digit” decrease in sales by its classic footwear franchise. It also reported softness in demand from Chinese consumers.
Nike forecast a “mid-teens” percentage decline in revenues in the current quarter, which runs until May, citing the impact of a strong US dollar and “unfavourable shipment timing” in its main market of North America. Analysts surveyed by Reuters expect revenue in the current quarter to be 12.2 per cent lower than the same period a year ago.
“We’re not satisfied with our overall results,” said Elliott Hill, who came out of retirement in October to take over as chief executive. “We can and will do better.”
The company has been hobbled by an unsuccessful focus on direct-to-consumer sales, a strategy it backed away from as part of a restructuring in December 2023. Analysts have also been critical of its dependence on lifestyle products and its over-reliance on fashion-based trends.
This had resulted in Nike ceding ground in an otherwise buoyant sneaker and athleisure market to Adidas and smaller, premium competitors such as On, Hoka and Lululemon.
After stunning the market last June with a revenue warning, Nike announced its CEO transition and withdrew its full-year sales forecast in October, just weeks before Hill took the reins.
Friend on Thursday said Nike’s gross margin would be 4-5 percentage points lower in the current quarter than the 41.5 per cent it reported for the three months to February.
The outlook took the shine off its most recent quarter, when Nike’s $11.3bn in revenues and $794mn in net income beat analysts’ estimates.
UBS analysts said there was a risk Nike’s earnings outlook could deteriorate further.
They said: “We don’t believe Nike has improved its product assortment or marketing enough yet to ensure trends won’t get worse. The good news is the company has decided to increase investments in the near term in order to return to healthy growth over the long term.”
Read the full article here
