Nike’s shares experienced a significant drop of nearly 8% on the New York Stock Exchange (NYSE) during early trading on Friday following the company’s announcement of an anticipated sales decline in the first half of the year.
This projection comes as Nike shifts its focus from older styles to more trendy sneakers in its fierce competition for market dominance against emerging brands.
According to Reuters, Barclays analyst Adrienne Yih stated, “What we heard on this quarterly call was that the merchandise margin recovery was coming slower largely due to management actions (reducing core product lines) and that sales through 1H25 would remain in negative territory.”
Following the latest results, Barclays brokerage slashed its price target by 20% to $114, marking the most significant adjustment on Wall Street. Investors paid close attention to executives’ remarks, emphasizing Nike’s prolonged direct-to-consumer (DTC) strategy’s failure to spur growth as anticipated. Consequently, the leading sportswear manufacturer is now focusing on revitalizing relationships with its wholesale partners.
“Nike’s distribution strategy is all over the place. Problem is customers want to buy Nike everywhere so reducing wholesale dramatically seems like the wrong move in hindsight,” said Jefferies analyst Randal Konik.
Nike’s direct-to-consumer (DTC) initiatives have faced challenges due to sluggish demand in North America. Lululemon Athletica, a competitor, reported a decline in annual revenue and profit due to decreased demand primarily in the same region, resulting in a 14% decline in its shares on Thursday.
Over the past year, Nike’s stock has depreciated by 16% in value. Nike’s forward price-to-earnings ratio stands at 24.84. In comparison, Adidas and Puma boast forward price-to-earnings ratios of 52.08 and 15.31, respectively.
