Nike Shares Plummet Following Poor Sales

Nike, which has legends of basketball such as Michael Jordan and current star LeBron James as part of its arsenal of endorsers, announced this week that total revenue was higher by only 5% during its just ended quarter.

Investors have become worried about the sluggish sales seen in North America, which represents close to 45% of the overall revenue of the company. North America sales grew by only 3% during the quarter in comparison to the same period one year ago.

The outlook by the company was not strong either. Nike said that it expects growth in sales to slow during the current quarter and its futures orders, which are a measure that investors consider as a proxy for Nike sales during the upcoming quarters, were lower by 4%.

Nike has faced tough competition from Adidas, which has returned to the fold with a strong resurgence. However, another key rival of Nike, Under Armour has struggled of late.

This year Under Armour has plummeted 30%. Nike continues to grow at a rapid rate across emerging markets and in Asia. Nike sales in its emerging markets area increased during the quarter by 8% and were higher by 9% in China and by 15% in Japan.

However, it appears the weak environment in the U.S. for retailers, in which many are struggling against Walmart and Amazon is hurting the sports footwear and apparel maker.

Sears warned this week that it might not be able to continue in business. Target, Kohl’s and Macy’s are all going through tough sales periods as well.

JC Penney, which announced earlier in the year it agreed to a deal with Nike that allows Nike to run small shops of its own inside JC Penney stores, is also struggling.

During its conference call on Tuesday with analysts, CEO Mark Parker from Nike said that the shift to e-commerce has impacted Nike.

Parker said the economics of old-fashioned brick and mortar retail is a factor that is driving an environment of more promotions over the short term.

The CEO added that the U.S. retail landscape in not steady and that is obvious to most.

One important Nike retail partner, Dicks the giant sporting goods retailer posted weak results in early March.

Finish Line another retailer of athletic apparel has struggled of late. Both stocks plummeted over 10% in 2017.

Nike last year was the worst performing Dow stock falling close to 20%.

Leave a Reply