Worse than expected: Nike shares fall by 20% due to sales decline

Nike shares fell by as much as 20% on Friday after the company reported weaker quarterly sales and reduced its outlook for the coming year, projecting a revenue decline amid weak demand for its products. The revenue drop followed a prolonged restructuring that management initiated in December, when it also suffered a significant stock drop after warning of reduced consumer demand.

However, the news of declining demand in Nike’s stores and online led to this unprecedented stock drop, which prompted a somewhat smaller decline for its partners such as JD Sports, Foot Locker, and Under Armour. The news undermined confidence among Wall Street analysts, with one questioning whether the company’s best days are long gone.

– Nike has overexposed itself to middle-class fashion trends, and the concept that it is for all consumers is something Nike management should forget – said TD Cowen investment bank director John Kernan to the Financial Times. Nike’s Chief Financial Officer Matthew Friend told analysts that it will take time to return to previous levels, but that the company is taking ‘aggressive’ action to reorganize store inventories.

Direct consumer revenues fell by eight percent in three months, totaling $5.1 billion as of May, while total revenues dropped two percent to $12.6 billion.

Nike has spent much of the year implementing a strategy change and a $2 billion cost-saving plan introduced in December. The entire plan focuses on direct-to-consumer sales and digital sales.

Nevertheless, Nike CEO John Donahoe told analysts that the next plan focuses on driving consumer innovation and improving operations. This reorganization is a continuation of the one from 2020 when Donahoe wanted to segment Nike’s sales; for men, women, and children, whereas until now it had been segmented by individual sports such as running, soccer, basketball, and so on.

These efforts seem to be bearing fruit, as Friend stated that the company now aims to regain the market share it once had and expand into the overall market instead of focusing on a specific channel. However, many these days claim that the credibility of Nike’s management has been seriously called into question, and the company’s renewed reorganization adds further uncertainty for investors.

In the last quarter, Nike also reported a sales decline in China, where its physical traffic fell by ‘double-digit value’ compared to the previous year, and ‘uneven’ trends in Europe, the Middle East, and Africa. The company indicated that it expects a revenue decline of 10% in the current quarter, along with an additional revenue drop in fiscal year 2025, which began in June. Nike’s revenues were slightly below expectations in the last quarter as sales of its Converse brand fell by 18%. Year-on-year sales fell by 1.7%, while net profit rose by 45%.