Nike Inc. (NYSE: NKE) shares sank after the world’s largest sportswear company issued a full-year outlook that missed expectations, reinforcing investor concerns about waning demand for its sneakers and apparel.
The owner of the Jordan and Converse brands sees revenue declining in the mid-single digits in the company’s current fiscal year, which began this month. According to estimates compiled by Bloomberg, analysts had expected growth of about 2% this year.
The shares fell as much as 13% in extended New York trading on Thursday evening. The stock had already declined 17% over the past 12 months. Other athletic retailers fell after Nike’s report, including Foot Locker Inc., Under Armour Inc., Dick’s Sporting Goods Inc. and Lululemon Athletica Inc.
The route extended to Asia during Friday’s morning trading. Li Ning Co Ltd dropped as much as 3.5% while Anta Sports Products Ltd fell 2.5%. Nike’s suppliers also took a hit. In Hong Kong, Shenzhou International Group Holdings Ltd slid as much as 5.4%, Yue Yuen Industrial Holdings Ltd fell 6.7%, while in Taiwan Feng Tay Enterprise Co. declined 7.9%
Nike sales have suffered in recent quarters as an attempt to pivot away from wholesalers has sputtered. Sales on its website, app and stores declined 8% in the company’s fiscal fourth quarter, missing Wall Street’s expectations.
Weakness in Nike’s sales channels “comes by surprise and is a reason for concern, as the activewear giant could be turning its core shoppers away due to lack of newness,” said Bloomberg Intelligence analyst Poonam Goyal.
Nike executives blamed the slowdown partly on lifestyle brands, including Air Force 1 and Nike Dunks, which get a high proportion of their online sales. The lifestyle category’s sales fell for the first time since the start of the pandemic, when demand for casual attire took off.
Revenue in the fourth quarter fell 1.7% to $12.6 billion, missing the average of analyst estimates. A notable laggard was the Converse subsidiary, known for its Chuck Taylor sneakers, where revenue plummeted 18% due to soft sales in both North America and Western Europe.
At the same time, sales in Greater China came to $1.86 billion, beating the average estimate, and earnings per share also surpassed expectations.
The revenue slowdown is adding urgency to Nike’s efforts to speed up product development. Amid a wave of competition from upstarts such as On Holding AG and Deckers Outdoor Corp.’s Hoka running shoes, Nike has vowed to prioritize sports, new products and wholesale partners that had largely received less attention from the company as it sought to boost its stores and websites.
“We’re also not convinced that a material rebound in running is a foregone conclusion, given strong competition in that sector,” Seaport Research Partners analyst Mitch Kummetz wrote in a note to clients after the results were released.
Chief Executive Officer John Donahoe said that Nike will release new franchises in the fitness and lifestyle categories in the second half of its fiscal year. He said Nike’s product development division has added new methods to fast-track products.
“A comeback at this scale takes time,” Chief Financial Officer Matt Friend said during the company’s call with analysts. But he cautioned that shifting the product lineup will erode sales in the short term.
