Nike is now a sick giant. The US giant expects a 10% drop in revenues in the first quarter of the 2024-2025 fiscal year (June-August) because competition is fierce. Not only from Adidas, but also from emerging brands such as Hoka and On. And markets are weak, including China. The company has also lowered its forecast for fiscal year 2025. Several analysts, however, believe that the scenario envisaged by Nike is far too optimistic. And they are prepared for the worst.
The stock market crash
On Friday 28 June, the value of Nike’s shares fell from EUR 88 to EUR 71. A drop that reflects investors’ distrust in the swoosh company, which ended the year with USD 51.4 billion in revenues. The market is not dynamic and Nike is not facing it with the right strategies. It faces declines in lifestyle sales, foreign exchange headwinds and macroeconomic uncertainty. And it is retreating in the crucial footwear sector. Models such as the Air Force 1 and Air Jordan 1 have fallen out of favour as fashionable customers prefer the Adidas Samba. While emerging brands are growing.
Sick giant
“There’s a sense that Nike hasn’t innovated enough, hasn’t done enough marketing, hasn’t told enough stories about its products”, GlobalData Retail managing director Neil Saunders told the BBC. According to Reuters, Nike’s strategy of favouring direct sales over wholesale channels has hurt sales. Nike CEO John Donahoe is under pressure. He is trying to launch a relaunch with a series of new products. To make room for them, Nike wants to retire its best sellers. And this is one of the reasons why the company expects a reduction in revenue. The goal is to almost triple the retro running business by the end of this fiscal year (May 2025). This relaunch will not happen overnight. The fiscal year 2025 has already been defined as “a transition year”. And this implies further deterioration before improvement.
Enough is enough
According to Sam Poser, analyst at Williams Trading, to chase an improvement in the accounts Nike runs the risk of saturating the market with products. And by pushing promotional activities, it would end up damaging brand value. “Nike today is not as exceptional a company as it was before 2020. And it doesn’t seem to be going in the right direction, despite management’s claims to the contrary”, Poser tells Footwear News. “We’re still not convinced that Nike has the team in place to bring it back to growth”, he says. Other analysts, such as Morgan Stanley and UBS, share the same view.
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