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Nike’s Stock Plummets Amid Forecast for Decline in Sales

Nike's Stock Plummets Amid Forecast for Decline in Sales

Nike’s stock suffered its largest one-day drop ever, plunging 20% on Friday and wiping out $28.41 billion from its market valuation. This dramatic decline followed the company’s unexpected forecast of a mid-single-digit percentage fall in fiscal 2025 revenue, contrary to analysts’ expectations of a slight rise.

Concerns are mounting over Nike’s ability to address market share losses to emerging brands like On and Hoka. The company’s US market share in sports footwear dropped from 35.4% in 2021 to 34.97% in 2023, while other brands like Hoka, Asics, New Balance, and On increased their collective share from 20% in 2013-2020 to 35% in 2023.

Nike has responded with a $2 billion cost-cutting plan, reducing inventory of oversupplied brands and introducing new, affordable sneakers worldwide. However, skepticism remains about the effectiveness of these measures.

Multiple brokerages, including Stifel, Morgan Stanley, and UBS, downgraded Nike’s stock, citing doubts about management’s credibility and the potential need for a leadership change. Analysts have expressed concerns over the company’s reliance on unproven products and the challenges posed by inflation and macroeconomic uncertainties.

CEO John Donahoe, who is in the fourth year of his five-year tenure, emphasized the company’s focus on digital sales and innovation. Despite assurances from Nike co-founder Phil Knight, some analysts believe a management shakeup may be necessary.

Analysts are preparing for a transitional period, predicting a challenging fiscal year 2025 for Nike as it navigates product adjustments, market pressures, and consumer behavior shifts. The company’s stock is down 30.6% in 2024, compared to a 14.5% gain for the S&P 500 index.

The recent performance has led to calls for immediate and thorough audits of Nike’s existing infrastructure and a reevaluation of its strategic direction. The upcoming investor day this fall will be critical for Nike to rebuild investor confidence and outline a clear path forward.

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