Nike, Foot Locker shares sink after athletic apparel maker cuts revenue outlook

Nike experienced a significant downturn in its shares on Friday, prompting a ripple effect on sneaker retailer Foot Locker, which heavily relies on Nike products in its stores. Nike’s stock closed more than 11% lower, marking its worst day since September 30, 2022, when it faced a 12.8% decline. Concurrently, Foot Locker closed nearly 4% down in response to the athletic apparel giant’s revised revenue outlook for the fiscal year.

In its recent earnings report on Thursday, Nike announced a downward adjustment in its revenue expectations for the fiscal year, now anticipating a 1% growth compared to the previous mid-single-digit growth projection. The company also revealed plans to implement cost-cutting measures amounting to over $2 billion over the next three years.

The revised outlook is attributed to heightened challenges, particularly in Greater China and the Europe, Middle East, and Africa (EMEA) regions, as highlighted by Nike’s Chief Financial Officer, Matthew Friend, during the earnings call. Friend pointed to increased headwinds, including digital traffic softness and the impact of a stronger U.S. dollar negatively affecting second-half reported revenue compared to the outlook 90 days ago.

Analysts from TD Cowen, in a note on Friday, emphasized the need for Nike to enhance its marketing efforts beyond basketball, streetwear, and lifestyle trends. They downgraded the stock to “market perform” from “outperform,” citing challenges in scaling innovation in the higher-end assortment and increasing disruptions from smaller competitors in the footwear and apparel space.

Conversely, Goldman Sachs analysts maintained their buy rating on Nike’s stock. However, they acknowledged concerns raised in the company’s report, pointing to slowing growth momentum amid a more competitive marketplace. Nike’s comprehensive discussion on key franchise life cycle management was highlighted as a factor that could weigh on future sales momentum.

The contrasting views from analysts underscore the complex landscape facing Nike, where challenges in certain markets and evolving consumer preferences necessitate a careful balance between innovation, marketing strategies, and cost management to ensure sustained growth in the highly competitive athletic apparel industry.