Nike’s shares experienced a significant drop on Friday as investors expressed concerns over the new CEO Elliott Hill’s plans to revive the struggling sneaker giant, following a warning that sales could decrease by double digits.
On Thursday, the company announced a 9% decline in sales during the crucial holiday season quarter, including a 17% slump in quarterly sales in China, and projected a steeper-than-expected drop in fourth-quarter revenue. Nike stated in an earnings call that sales would be down in the “mid-teens range” for the quarter ending in May, surpassing Wall Street’s expectation of an 11.4% decline.
Hill, who assumed the role in October to help the company regain lost market share, has introduced what he termed a “Win Now” strategy, which includes increasing on-the-ground presence in key cities such as Shanghai and Beijing.
“The plan is there, (but) they are just not seeing results yet,” commented Jay Woods, chief global strategist at Freedom Capital Markets.
Nike’s stock fell as much as 9% after Friday’s opening bell, reaching its lowest level since the pandemic. Shares were down 5% in midday trading. The Beaverton, Oregon-based company has lost 5% of its value so far this year, following a 30% plunge in 2024.
“Nike is working to return to what made it special,” wrote BMO analyst Simeon Seigel in a research note. “This is clearly not for everyone as turns take time.”
The company’s prolonged struggle to reverse declining revenues and reignite growth is intensifying this year, with Nike executives attributing the issues to weak consumer demand, an incomplete turnaround strategy, and the impact of a 20% tariff on goods from China that took effect at the start of March. Nearly one quarter of Nike’s merchandise is produced in China.
“We are also navigating through several external factors that create uncertainty in the current operating environment, including geopolitical dynamics, new tariffs, volatile foreign exchange rates and tax regulations, as well as the impact of this uncertainty and other macro factors on consumer confidence,” said Chief Financial Officer Matt Friend during an earnings call with analysts on Thursday.
In recent years, the company reduced the number of retailers selling its sneakers and apparel, including discounter DSW, betting on increased sales through its own stores and online platforms. However, it now faces stiff competition from newcomers like Hoka and On.
The company is reintroducing some of those traditional retailers. “Nike took it too far and underestimated the importance of third-party retailers,” noted Neil Saunders, an analyst at GlobalData Retail, in a note to clients in June.
Hill has expedited certain sneaker launches, such as Pegasus Premium and Vomero 18, which helped the company post a smaller-than-expected drop in quarterly revenue and profit. Nonetheless, Nike aims to move beyond the previous management’s strategic missteps that led to a lack of innovation in its product lines.
— news from New York Post