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Shares in Nike fell sharply on Friday after the world’s largest sportswear maker by revenue warned that sales would fall this year, roiling shares of companies including JD Sports and Foot Locker.
Nike reported weaker-than-expected quarterly revenue late Thursday and lowered its outlook for the coming year, predicting sales would fall by a mid-single-digit percentage point due to a slowdown in demand.
The profit loss follows a lengthy restructuring initiated by management in December, when the company also faced a sharp drop in shares after warning of weakening consumer demand.
News of falling demand at Nike stores and online sent shares in Nike plummeting 20 percent in late morning trading on Friday, setting them on course for their worst one-day decline since 2001. That led to smaller declines in retail shares of London-listed companies JD Sports to US sportswear groups Foot Locker and Under Armour.
The news undermined confidence among Wall Street analysts, with one questioning whether the company’s best days were behind it.
“Nike has become overexposed to mid-range fashion trends that are being disrupted by more premium brands such as Hoka, On, Lululemon and other newcomers that are appealing to consumers,” John Kernan, managing director at TD Cowen, wrote in a note to customers.
“The concept of being all things to all consumers in the industry is essentially over and Nike management needs to pivot,” he added.
Matthew Friend, Nike’s chief financial officer, told analysts on a conference call on Thursday that “a comeback on this scale takes time” and that the company was taking “aggressive” action to reorganize inventory at Nike stores and in its digital channel after seeing declining demand for lifestyle products.
Nike’s direct-to-consumer sales fell 8 percent to $5.1 billion in the three months through May, while total sales fell 2 percent to $12.6 billion.
Nike has spent much of the year executing on a strategy shift and a $2 billion cost-cutting plan laid out in December. The shift is something of a reversal from an earlier reorganization, begun before the Covid-19 pandemic, to focus on direct-to-consumer and digital sales.
John Donahoe, Nike’s CEO, told analysts that “the staffing of the save-to-invest strategy” [plan] is behind us. And now those teams are focused on driving innovation and consumer execution.”
The 2024 turnaround follows a major top-to-bottom overhaul initiated by Donahoe in 2020 that saw Nike move away from divisions organized by individual sports, such as running or soccer, and toward men’s, women’s and kids’ silos, while emphasizing higher-margin direct-to-consumer sales.
Those efforts appear to have backfired. Friend, Nike’s chief financial officer, said the company is now focused on regaining market share and expanding “the overall market” rather than focusing on “one specific channel or the other.”
Jim Duffy, managing director at Stifel, wrote that Nike’s “management credibility is in serious jeopardy and the possibility of a change in the C-level regime creates even more uncertainty.”
In the latest quarter, Nike also reported declines in the Greater China region, where physical store traffic fell by “double digits” compared to the previous year, and “uneven” trends in Europe, the Middle East and Africa.
The company expected sales to fall 10 percent in the current quarter and sales to decline by a percentage in the mid-single digits in the 2025 fiscal year, which started in June.
Nike’s revenue came in slightly below expectations last quarter, as sales at its Converse brand fell 18 percent, but the company’s profit of 99 cents per share beat analysts’ expectations by nearly 20 percent. Year over year, revenue fell 1.7 percent, while net income rose 45 percent.