Nike shares on Friday tumbled nearly 20% after the company said it expected sales to decline in its new fiscal year, the latest sign of severe turbulence at Oregon’s biggest company.
It was the biggest one-day drop in Nike history, wiping out roughly $28 billion in shareholder wealth.
Even before Friday’s tumble, Nike’s stock had been heading steadily downward after climbing above $170 in November 2021. Shares closed Friday at $75.36.
Under CEO John Donahoe, who started work in 2020, the sportswear giant bet heavily on direct sales and the popularity of Nike classics, like Air Jordans, Dunks and Air Force 1s. The move away from wholesale opened shelf space for competitors, including Hoka and On, who have gained momentum.
Thursday night, the company said demand for “lifestyle” sneakers, like Dunks, is slowing more than previously expected.
“We were surprised at what we saw on these larger franchises as we were navigating through the … quarter,” Chief Financial Officer Matt Friend said on a call with stock analysts.
Friend forecast a mid-single digit sales decrease in the Nike fiscal year that started June 1. Analysts previously expected sales would increase roughly 2%, according to Bloomberg.
“Last night was a big disappointment across the board,” said Brian Yarbrough, an Edward Jones consumer research analyst. “There weren’t a lot of positives in there.”
Before Friday, a one-day 19.5% price drop on Feb. 27, 2001, was the worst day for Nike’s shares. That day, the company said a new ordering system “wrecked its shoemaking schedule,” leaving Nike with “double the needed amount.”
On Thursday’s call, Donahoe and Friend used the word “comeback” five times between them as they worked to convince investors that Nike’s previously announced plans to invigorate its product pipeline will bear fruit around the holiday season.
The company’s also laid off 2% of its corporate workforce, part of a $2 billion cost-cutting plan.
Some analysts remained skeptical, especially after the sudden change in Nike’s sales forecast.
“Management credibility is severely challenged and potential for C-level regime change adds further uncertainty,” wrote Stifel Managing Director Jim Duffy in a note to investors.
Williams Trading analyst Sam Poser put it more bluntly.
“Nike is a mess and is deflated, as is any confidence we may have had,” he wrote, adding how recent layoffs and voluntary attrition have left the company short-handed at a moment of crisis.
Edward Jones’s Yarbrough was less pessimistic given Nike’s track record.
“If you go back in history, when Nike puts its full force behind innovation, usually the following several years are very good.”
– Matthew Kish covers business, including the sportswear and banking industries. Reach him at 503-221-4386, mkish@oregonian.com or @matthewkish.
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