By Ananya Mariam Rajesh and Juveria Tabassum
(Reuters) -Nike's stock slumped 20% on Friday as a forecast for a surprise drop in annual sales amplified investor concerns about the pace of the sportswear giant's efforts to stem market share losses to upstart brands such as On and Hoka.
It was the worst day ever for the stock, and the losses wiped out $28.41 billion from the company's market valuation.
The company on Thursday projected a mid-single-digit percentage fall in fiscal 2025 revenue, compared with analysts' estimates of a near 1% rise.
"Nike is at a point where they want to put out the most conservative guidance they can, such that they're setting the bar low for themselves and hopefully it's a bar they can beat," said Art Hogan, chief market strategist at B Riley Wealth.
Its forecast dragged shares of rivals and sportswear retailers across Europe, UK and the United States on Friday.
British sportswear retailer JD Sports lost 5.4% at Friday's close, while Germany's Puma fell 1%. Adidas' shares were up marginally.
"Nike's been under pressure for a couple of years now. I certainly think they have an opportunity now that the valuation's been reset extremely low to start getting some sponsorship, but it's just not going to happen today or this week," Hogan added.
The company's U.S. market share in the sports footwear category fell to 34.97% in 2023 from 35.37% in 2022, and 35.40% in 2021, according to GlobalData.
Meanwhile, other sporting goods brands such as Hoka, Asics, New Balance and On accounted for 35% of the global market share in 2023 compared to the 20% held over the 2013-2020 period, according to an RBC research report released in June.
To curb a worsening sales decline, Nike has cut back on oversupplied brands including Air Force 1, as part of a $2 billion cost-cutting plan launched late last year.
The sportswear giant is also tweaking its product lineup to roll out new $100-and-under sneakers in countries around the world to appeal to price-conscious consumers.
It will also roll out this year an Air Max version and Pegasus 41 with full-length foam midsole made from ReactX to boost sustainability.
"This is still Nike and we expect their size and scale to prove a long term competitive advantage but the burden of proof (is) on management execution at this point," said BMO Capital Markets analyst Simeon Siegel.
MANAGEMENT SHAKEOUT?
The underperformance over the past year has led to some Wall Street analysts raising the possibility of a management shake-up ahead of the company'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 it (a leadership change) is very much needed."
CEO John Donahoe is in his fourth year of a five-year commitment as Nike's top boss. The former eBay CEO, who succeeded Mark Parker, was hired to focus on strengthening the company's digital channel sales.
"I have seen Nike's plans for the future and wholeheartedly believe in them. I am optimistic in Nike's future and John Donahoe has my unwavering confidence and full support," Phil Knight, co-founder and chairman emeritus, said in a statement.
At least six brokerages downgraded the stock and 15 cut their price targets.
(Reporting by Ananya Mariam Rajesh, Juveria Tabassum, Reshma Rockie George in Bengaluru and Linda Pasquini and Samuel Indyk in London, editing by Alun John, Sriraj Kalluvila and Shinjini Ganguli)