Shares in Sportswear Companies Plummet as Nike Lowers Sales Forecasts

Shares in the world’s leading sportswear companies took a nosedive on Friday following a less-than-optimistic sales forecast from apparel giant Nike. The market heavyweight warned of a decline in consumer spending and announced plans to achieve $2 billion in cost savings over the next three years.

Stocks for Adidas, Puma, and JD Sports Fashion all slumped on Friday morning in response to Nike’s disappointing fourth-quarter results. Nike shares themselves took a significant hit, dropping 12% during Thursday’s after-hours trading session.

Adidas, which had experienced a 46% increase in shares over the past year, saw a 6% decline. Puma shares fell 5%, having already decreased by 7% in the past 12 months. Additionally, JD Sports shares dipped 5%, despite a previous rise of 39% over the last year.

These drops in share prices can be directly attributed to Nike’s decision to revise its guidance for the fiscal year ending in May. The company predicts a minimal 1% growth in annual revenues, a stark contrast to its earlier projection of mid-single digit growth.

During an earnings call on Thursday, Nike CFO Matt Friend pointed out that the company is observing signs of cautious consumer behavior across various regions due to an inconsistent global economic landscape.

Nike Faces Retail Sales Shortfall and Economic Headwinds

Nike, one of the leading sportswear companies, fell short of retail sales expectations in the second quarter, with a major setback occurring in their online retail business. On top of this, the company’s Chief Financial Officer (CFO) has warned that macroeconomic challenges, particularly in the Greater China and Europe, Middle East and Africa regions, are likely to affect Nike’s sales in the near future.

While Nike experienced a surge in sales during significant consumer events like Black Friday, the periods in between these moments proved to be softer compared to previous quarters. This decline in sales has prompted Nike to devise a plan to generate $2 billion in cost savings over the next three years. Among the strategies outlined is the implementation of automation and staff reduction. The company has already begun laying off employees at its Beaverton, Oregon headquarters.

This lower forecast from Nike serves as a reflection of the challenging times facing the sportswear industry, with downturns in major economies expected to impact consumer spending.

Despite these hardships, analysts at Citi, led by Monique Pollard, believe that rival company Adidas may be less affected due to their stronger focus on wholesale markets, which are seen as more resilient compared to unpredictable direct-to-customer sales.