Nike shares tumble 20% as sales warning rattles retailers

Nike shares plummeted on Friday after the world’s largest sportswear maker by revenue warned that its sales would fall this year, rattling retail stocks from JD Sports to Foot Locker.

Nike late on Thursday reported weaker than expected quarterly sales and lowered its outlook for the year ahead, projecting that revenue would fall by a mid-single-digit percentage amid a slowdown in demand.

The earnings miss follows a protracted restructuring initiated by management in December, when it also suffered a steep stock drop after warning of softening consumer demand.

The news of declining demand in Nike’s stores and online sent its shares down 20 per cent on Friday. That prompted smaller falls in retail stocks from London-listed JD Sports to US sportswear groups Foot Locker and Under Armour.

The news undermined confidence among Wall Street analysts, with one asking whether the company’s best days were behind it.

“Nike has become overexposed to mid-tier, fashion-based trends that are being disrupted by more premium based brands such as Hoka, On, Lululemon and other upstarts that are appealing to consumers,” John Kernan, managing director at TD Cowen, wrote in a note to clients.

“The concept of being all things to all consumers in the sector is effectively over and Nike management needs to pivot,” he added.

Matthew Friend, Nike’s chief financial officer, told analysts on a Thursday conference call that “a comeback at this scale takes time” and that the company was taking “aggressive” action to reorganise inventory at Nike-owned stores and in its digital channel after seeing slowing demand for lifestyle products.

Nike’s direct-to-consumer revenues fell 8 per cent in the three months ended in May to $5.1bn, while total revenues sank 2 per cent to $12.6bn.

Nike has spent much of the year executing a strategy shift and a $2bn cost-saving plan articulated in December. The shift is something of an about-face on a previous reorganisation, begun before the Covid-19 pandemic, to focus on direct-to-consumer and digital sales.

John Donahoe, Nike’s chief executive, told analysts that “the headcount dimension of the save-to-invest [plan] is behind us. And now those teams are focused on driving for the consumer innovation and execution.”

The 2024 turnaround effort followed a sweeping, top-to-bottom reorganisation initiated by Donahoe in 2020, shifting Nike away from divisions organised by individual sports, such as running or football, and into men’s, women’s, and kids silos while emphasising higher margin sales directly to consumers.

Those efforts appear to have backfired. Friend, Nike’s finance chief, said the company was now aiming to win back market share and expand “the overall marketplace” rather than focusing on “one particular channel or the other”.

Jim Duffy, managing director at Stifel, wrote that Nike’s “management credibility is severely challenged and potential for C-level regime change adds further uncertainty.”

In its latest quarter, Nike also reported declines in the greater China region, where its brick-and-mortar traffic fell by “double digits” compared with the previous year, and “uneven” trends in Europe, the Middle East and Africa.

The company said it expected revenue to drop 10 per cent in the current quarter, and for revenue in the 2025 fiscal year — which started in June — to decline by a mid-single-digit percentage.

Nike’s revenues were slightly below expectations last quarter as sales of its Converse brand dropped 18 per cent, but the company’s earnings of 99 cents a share exceeded analysts’ forecasts by almost 20 per cent. Year on year, sales fell 1.7 per cent, while net income was up 45 per cent.