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(Bloomberg) — Nike Inc. this week gave investors hope for plans to boost sales as its stock posted back-to-back annual losses for the first time since the 1980s, lagging its peers and peers. There is pressure to prove something. wider market.
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The world’s largest sportswear company has lost more than 40% of its value since its peak in 2021, leaving shareholders worth about $130 billion. The company is struggling with the same headwinds as other consumer stocks as shoppers rein in spending in the face of rising borrowing costs.
But ahead of Nike’s earnings report after the market closes on Thursday, analysts said the company is launching new footwear and apparel products to revive demand as it competes with companies such as On Holding, Adidas and Decker’s Outdoor Inc.’s Hoka. It also states that there is a need to expand. The company’s stock has underperformed all of those companies this year, and last week it received an unusual sell rating from Williams Trading.
Bank of America analyst Lorraine Hutchinson said in a note to clients this week that “the key catalyst for the stock’s sharp rise is if Nike innovates enough to cause a sales shift.” That’s proof that there is.”
The company had already warned in December that sales would decline in the quarter ending in February, which is the subject of Thursday’s announcement. Wall Street analysts are the least bullish on Nike since August, according to data compiled by Bloomberg. Williams Trading’s Sam Poser downgraded the stock for sale last week, saying the company was “losing its luster.”
In December, Oregon-based Nike announced plans to cut jobs and streamline its product lineup after declining sales. The company also lowered its sales growth forecast for the fiscal year ending in May, saying it is at the beginning of a multi-year product innovation cycle. This month, Nike is launching the Air Max DN sneaker, billed as “the best Air Max offering in years.”
“Consumers are getting a little tired of seeing the same thing over and over again,” said Christina Fernandez, an analyst at Telsey Advisory Group. “They need something new,” she said, “and that’s where innovation comes in to get consumers shopping.”
This is especially true given global pressures on demand for discretionary goods. Sportswear companies such as On, Adidas and Skechers USA Inc. all disappointed investors with their annual outlooks released in the past few months. On Thursday, retail giant Academy Sports & Outdoors announced a weaker-than-expected sales outlook.
“Pain Point”
In Fernandes’ view, expectations are high for Nike’s product innovations, given its position as the industry’s biggest player. He said he expected to hear details about Nike’s plans to regain market share, as the running sector has been a particular “pain point” for investors.
Read more: Niche running shoes like Hoka and On are beating out industry giants
BofA’s Hutchinson also wants to hear about Nike’s growth strategy for the Jordan Brand and women’s business. This summer’s Paris Olympics could be the catalyst for product launches, but “we’re more interested in evaluating whether Nike can bring innovation that resonates with everyday customers,” she said. wrote.
With the victory in Europe, Nike will replace Adidas as the main uniform sponsor of the German national soccer team from 2027, the German Football Association announced on Thursday.
Nike said in December it expected sales to rise about 1% for the fiscal year that ended in May, downgrading from its previous forecast for mid-single-digit growth. This would be the slowest annual growth rate since the year ending in May 2010, excluding 2020 amid pandemic-era regulations and supply chain disruptions. Analysts surveyed by Bloomberg expect a recovery in fiscal 2025, with sales expected to rise by about 6%.
Bernstein’s Aneesha Sherman believes Nike’s stock is undervalued, trading at a forward P/E of about 25 times, below the five-year average of about 32 times.
Still, he sees the company’s sales trends improving more slowly than expected at the beginning of the year, largely because consumer demand for discretionary goods has recovered more slowly than expected.
“It will take several quarters for sentiment to change and confidence in management to establish,” she said. “It’s going to be a slow trajectory.”
(Updates table and adds details about German soccer team agreement in paragraph 11.)
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