Posted on 06/30/2024 5:19:45 PM PDT by lasereye
Nike shares on Friday tumbled nearly 20% after the company said it expected sales to decline in its new fiscal year, the latest sign of severe turbulence at Oregon’s biggest company.
It was the biggest one-day drop in Nike history, wiping out roughly $28 billion in shareholder wealth.
Even before Friday’s tumble, Nike’s stock had been heading steadily downward after climbing above $170 in November 2021. Shares closed Friday at $75.36.
Under CEO John Donahoe, who started work in 2020, the sportswear giant bet heavily on direct sales and the popularity of Nike classics, like Air Jordans, Dunks and Air Force 1s. The move away from wholesale opened shelf space for competitors, including Hoka and On, who have gained momentum.
Thursday night, the company said demand for “lifestyle” sneakers, like Dunks, is slowing more than previously expected.
“We were surprised at what we saw on these larger franchises as we were navigating through the … quarter,” Chief Financial Officer Matt Friend said on a call with stock analysts.
Friend forecast a mid-single digit sales decrease in the Nike fiscal year that started June 1. Analysts previously expected sales would increase roughly 2%, according to Bloomberg.
“Last night was a big disappointment across the board,” said Brian Yarbrough, an Edward Jones consumer research analyst. “There weren’t a lot of positives in there.”
Before Friday, a one-day 19.5% price drop on Feb. 27, 2001, was the worst day for Nike’s shares. That day, the company said a new ordering system “wrecked its shoemaking schedule,” leaving Nike with “double the needed amount.”
On Thursday’s call, Donahoe and Friend used the word “comeback” five times between them as they worked to convince investors that Nike’s previously announced plans to invigorate its product pipeline will bear fruit around the holiday season.
The company’s also laid off 2% of its corporate workforce, part of a $2 billion cost-cutting plan.
Some analysts remained skeptical, especially after the sudden change in Nike’s sales forecast.
“Management credibility is severely challenged and potential for C-level regime change adds further uncertainty,” wrote Stifel Managing Director Jim Duffy in a note to investors.
Williams Trading analyst Sam Poser put it more bluntly.
“Nike is a mess and is deflated, as is any confidence we may have had,” he wrote, adding how recent layoffs and voluntary attrition have left the company short-handed at a moment of crisis.
Edward Jones’s Yarbrough was less pessimistic given Nike’s track record.
“If you go back in history, when Nike puts its full force behind innovation, usually the following several years are very good.”
I can’t remember ever buying any Nike gear, but I bought the stock on Friday after the drop. I’ve seen this play out before... company announced poor earnings, and the market overcorrects. I could be wrong, but Nike is still a great brand, and I think i can make some quick $$.
It is a dog with fleas—pump and dump.
:-)
Pushing America Last athletes Colin Kaepernick and Megan Rapinoe as faces of the company was a terrible decision.
China tariffs coming up!
I will never buy Nike after it hired Michael Vick and compounded the problem by having the mug of Colin Kapernick on that building.
I work for an AAA affiliate of MLB. I get offered free gifts from this company and ALWAYS reject them. I told the team that I do not endorse the Chinese Checkmark company.
I usually get mixed responses. Like - Why does someone not want free stuff?
I refuse to obey.
NB are now my only choice, though the last pair I had fell apart in a year.
I don’t know why people want to spend so much money on a tennis shoe with a check mark on it.
I had forgotten about that. That and having a senile President are two of the weirdest things in the last 30 years.
If been using NB for years. Agree with you.
Queer shoes just don’t sell well.
For several decades I attempted to explain to my kids that buying brand name hype was just pasting a Sucker billboard on their backs.
Couldn’t have happened to more deserving slave master, to bad that it took down shareholders too.
I hope Nike just dies.
If pressed, I will always buy alternative sports wear rather than Nike.
Hokas are great and I haven’t had an issue with stitching failing before the treads wear out unlike nike.
I worked there for 15 years. I all by myself saved them 1 million on a Texas tax audit. They did not care....at all. And after that neither did I.
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