(Bloomberg) — Shares of Nike Inc. fell after the world’s largest sportswear company released full-year guidance that missed expectations, reinforcing investor concerns about declining demand for its sneakers and apparel.
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The owner of the Jordan and Converse brands has seen sales decline by single digits in the company’s current fiscal year, which started this month. Analysts had expected growth of about 2% this year, according to Bloomberg estimates.
Shares fell as much as 13% in extended trading in New York on Thursday evening. The stock had already fallen 17% in the past twelve months. Other athletic retailers fell after Nike’s report, including Foot Locker Inc., Under Armor Inc., Dick’s Sporting Goods Inc. and Lululemon Athletica Inc.
The rout expanded into Asia during Friday morning trading. Li Ning Co Ltd fell 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 fell as much as 5.4%, Yue Yuen Industrial Holdings Ltd fell 6.7%, while Feng Tay Enterprise Co. in Taiwan fell by 7.9%.
Nike sales have suffered in recent quarters as an effort to move away from wholesalers has failed. Sales on its website, app and in stores fell 8% in the company’s fiscal fourth quarter, missing Wall Street expectations.
The weakness in Nike’s own sales channels “comes as a surprise and is a cause for concern, as the activewear giant could drive away its core customers due to a lack of novelty,” said Poonam Goyal, an analyst at Bloomberg Intelligence.
Nike executives blamed the slowdown on lifestyle brands including Air Force 1 and Nike Dunks, which do much of their sales online. Sales in the lifestyle category fell for the first time since the start of the pandemic as demand for casual clothing increased.
Fourth-quarter revenue fell 1.7 percent to $12.6 billion, missing analysts’ average expectations. A notable laggard was Converse’s subsidiary, known for its Chuck Taylor sneakers, where revenue plunged 18 percent due to weak sales in both North America and Western Europe.
At the same time, sales in Greater China reached $1.86 billion, beating the average estimate, and earnings per share also exceeded expectations.
The sales slowdown adds urgency to Nike’s efforts to accelerate product development. Amid a wave of competition from newcomers such as On Holding AG and Deckers Outdoor Corp.’s Hoka running shoes, Nike has pledged to prioritize sports, new products and wholesale partners that have largely received less of the company’s attention as it has sought to boost its own stores and websites.
“We are also not convinced that a material recovery in running is a foregone conclusion given the strong competition in that sector,” Seaport Research Partners analyst Mitch Kummetz wrote in a note to clients after the results were announced.
Chief Executive Officer John Donahoe said Nike will launch new franchises in the fitness and lifestyle categories in the second half of the fiscal year. He said Nike’s product development department has added new methods to accelerate products.
“A comeback of this scale takes time,” Chief Financial Officer Matt Friend said on a call with analysts. But he warned that shifting product lines will erode sales in the short term.
–With assistance from Daniela Wei.
(The fourth paragraph updates the exchange rate development in Asia.)
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