Nike’s stock reached a five-year low on Friday as the sports apparel company indicated that a global trade war and cautious consumer behavior were making its attempts to increase sales as part of a turnaround more challenging.
On Thursday evening, the company predicted a larger-than-anticipated decline in revenue for the three months ending in May, presenting a new hurdle as Nike aims to reclaim market share lost to Adidas and emerging brands. On Friday morning, Nike’s shares plunged by as much as 9.3% during trading on Wall Street, reducing the company’s market capitalization to under $100 billion. The stock eventually recouped some losses, finishing the day down 5.5% at a five-year low.
This drop marked Nike’s largest single-day stock decline in nearly six months, and one of the most significant drops over the past five years. Chief Financial Officer Matthew Friend noted on Thursday that Nike was grappling with “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 reported strong holiday sales but faced decreasing sales in its Jordan brand and a “double-digit” decrease in its classic footwear line. There was also a noted decline in demand from Chinese consumers. Nike predicts a “mid-teens” percentage fall in revenues for the current quarter, ending in May, influenced by the strong U.S. dollar and “unfavorable shipment timing” in its primary North American market. Reuters-polled analysts anticipate a 12.2% revenue decrease for the quarter compared to the previous year.
Elliott Hill, who returned from retirement in October to assume the role of CEO, stated, “We’re not satisfied with our overall results. We can and will do better.” The company has struggled with an unsuccessful focus on direct-to-consumer sales, a strategy it revised as part of a restructuring in December 2023. Analysts have criticized its reliance on lifestyle products and fashion-based trends.
This reliance allowed Nike to lose ground in a flourishing sneaker and athleisure market to Adidas, as well as smaller premium competitors like On, Hoka, and Lululemon. After surprising the market with a revenue warning last June, Nike announced a CEO transition and retracted its full-year sales forecast in October, shortly before Hill took over.
Friend mentioned on Thursday that Nike’s gross margin would be 4-5 percentage points lower in the current quarter compared to the 41.5% reported for the three months ending in February. This projection overshadowed its most recent quarter when Nike’s $11.3 billion in revenues and $794 million in net income exceeded analyst expectations.
UBS analysts warned of a potential further decline in Nike’s earnings outlook, stating, “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.”
