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Sneaker stocks fall after Nike’s profits slump

Key finding

  • Shoe giant Nike announced its fourth-quarter results after the stock market closed on Thursday, but sales fell short of analysts’ expectations.
  • The sporting goods giant’s share price fell on Friday as investors questioned the company’s ability to withstand increasing competition from On Holding and Hoka. But the company’s shares weren’t the only ones suffering.
  • European sportswear companies such as Adidas and Puma saw their shares fall, while retailers such as Foot Locker also suffered losses.

Sportswear giant Nike (NKE) reported earnings and forecasts that fell short of analysts’ expectations, sending tremors through markets in the U.S. and Europe.

Footwear and sporting goods makers lost ground on Friday. Shares of Skechers (SKX) ended the day 1% lower. Shares of UGG and Hoka maker Deckers Outdoor (DECK) lost 3.2%, while retailer Foot Locker (FL) lost about 2.4% on the day.

European companies were also affected as investors reduced their bets on the US-listed ADRs of German company Puma and British retailer JD Sports.

New Nike competitors are gaining ground

One of the concerns investors have is the rise of new brands such as On Holding and Hoka. Nike management said direct sales fell 8 percent as customers switched to trendier brand names.

Analysts at Wedbush said Nike is now “in the proverbial penalty box until new product innovations actually emerge and management regains investor confidence.”

Some reports suggest that smaller rivals like On Holdings (ONON) and Hoka are communicating better with consumers as Nike loses ground with Generation Z. Nike reported challenges in China as well as Europe, the Middle East and Africa, suggesting weakness outside the U.S.

Nike may step up its marketing efforts ahead of the Olympics to stem the slide in its shares, which have fallen nearly 30 percent since the beginning of the year.

“The Paris Olympics provide us with a climax to share our vision of sport with the world,” CEO John Donahoe told analysts on the company’s quarterly earnings call.

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