Nike shares: Nike shares dropped 18.6 per cent in early trade on Friday following a forecast of a surprising decline in annual sales, intensifying investor concerns about the sportswear giant's ability to counteract market share losses to emerging brands like On and Hoka.

Nike projected a mid-single-digit percentage decrease in fiscal 2025 revenue, contrasting sharply with analysts' expectations of a nearly 1 per cent increase. This announcement led to a drop in shares of competitors and sportswear retailers across Europe, the UK, and the U.S.

British sportswear retailer JD Sports fell as much as 6.6 per cent, Germany's Puma lost 3 per cent, and Adidas edged lower after initially rising nearly 2 per cent.

If the current losses persist, Nike's shares are set for their worst day in over two decades, potentially erasing nearly $27 billion in market value.

"Investors are likely to keep Nike shares in the penalty box until new product innovations materialize and management regains investor trust," Wedbush analyst Tom Nikic said.

Nike has been cutting back on oversupplied brands, including Air Force 1, to mitigate a worsening sales decline as part of a $2 billion cost-cutting plan launched late last year. This year, Nike plans to release an Air Max version and Pegasus 41 with a full-length foam midsole made from ReactX to enhance sustainability, addressing concerns about stagnating innovation.

According to a June RBC research report, emerging sporting goods brands like Hoka, Asics, New Balance, and on accounted for 35 per cent of the global market share in 2023, up from 20 per cent between 2013 and 2020. Nike's U.S. market share in the sports footwear category dropped to 34.97 per cent in 2023 from 35.37 per cent in 2022 and 35.40 per cent in 2021, according to GlobalData.

"They know where the problems are, but they're currently struggling to generate demand, and it will take time to transition in different markets," said Morningstar analyst David Swartz.

Management Shake-Up?

The company's underperformance over the past year has led some Wall Street analysts to speculate about a potential management shake-up ahead of Nike's investor day this fall.

"In retail, if you have two bad quarters, you're usually out the door," said Jessica Ramirez, senior analyst at Jane Hali & Associates. "I think a leadership change is very much needed."

CEO John Donahoe is in his fourth year of a five-year commitment as Nike's top executive. The former eBay CEO, who succeeded Mark Parker, was hired to focus on strengthening the company's digital channel sales.

Nike did not immediately respond to a Reuters request for comment on potential leadership changes.

At least six brokerages downgraded the stock, and 15 cut their price targets.

(With Reuters inputs)

Nike shares plunge on gloomy sales forecast, raising growth concerns

Nike projected a mid-single-digit percentage decrease in fiscal 2025 revenue, contrasting sharply with analysts' expectations of a nearly 1 per cent increase.

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