Nike shares slump 15 per cent as annual sales drop

Nike shares slumped 15 per cent in premarket trading on Friday as a forecast for a surprise drop in annual sales amplified investor concerns about the sportswear giant ceding more market share to upstart brands such as On and Hoka.

The company forecast a mid-single-digit percentage fall in fiscal 2025 revenue, compared to analysts' estimates of a near one per cent rise, dragging shares of rivals and sportswear retailers across Europe, UK and US on Friday.

Germany's Puma lost three per cent, while Adidas briefly rose more than 1.5 per cent.

"We think Nike's long-term growth and profitability trajectory is subsequently both unclear," Morgan Stanley analysts led by Alex Straton said, downgrading the company's stock to "equal-weight" from "overweight."

Nike has cut back on oversupplied brands such as Air Force 1 to curb a worsening sales decline as part of a $2 billion cost cut plan launched late last year.

"They know where the problems are, but they're having trouble right now generating demand and it is going to be a transition period that is going to take some time in different markets," Morningstar analyst David Swartz said.

Newer sporting goods brands, including Hoka, Asics, New Balance and On, accounted for 35 per cent of global market share in 2023 compared to the 20 per cent held over the 2013-2020 period, according to a RBC research report released in June.

Nike's US market share in the sports footwear category fell to 34.97 per cent in 2023 from 35.37 per cent in 2022, and 35.40 per cent in 2021, according to GlobalData.