Nike warning hits stock prices of manufacturers Lululemon, On, Under Armor and Hoka, Deckers Outdoor
Nike (NKE) last dreadful quarter had investors panicking in other big sportswear stocks.
Shares of Nike rivals Lululemon (LULU), On (ONO), Under Armor (SAU), and the manufacturer Hoka Deckers Outdoor (BRIDGE) all fell Friday in premarket trading. The declines likely reflect two aspects of Nike’s quarter and outlook.
35:15 -0.25 (-0.71%)
Closing: October 1 at 4:00:02 p.m. EDT
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On the one hand, comments from Nike CEO Elliott Hill suggest that weakness in the sportswear market will continue in the medium term. This causes Nike to cut back on slow-moving products, which could prompt others in the industry to do the same.
The company forecast results for its entire financial year was also well below analyst estimates.
“Nike Sportswear, which accounted for a little less than half of the revenue this quarter, was down double digits,” Hill said during an earnings conference call. “The decline reflects a combination of deliberate actions, product underperformance and broader market pressures. The first factor was what we expected. As expected, we reduced Dunk revenue by nearly 50% during the quarter. This resulted in an approximately $200 million headwind in sportswear. Additionally, some aging, higher-volume athletic shoes sold below expectations. Looking ahead, this has impacted our future order books as we work proactively with our wholesale partners to manage excess inventory to create a healthy market.”
The other factor at play is just Nike’s gross results for the quarter. They’re tough to watch and have probably made investors in Nike’s competitors wonder if their companies were sitting on similar ugliness.
Nike brand sales fell 4%. Online sales plunged 13%. Converse sales fell 28%. Sales in China collapsed by 26%. And the company signaled that another round of major layoffs was coming.
Nike shares fell nearly 10% in premarket trading. Prior to the report, shares had fallen 76% over the past five years.
“We’re not yet ready to bottom out with shares trading at 28x P/E at the midpoint of FY27E guidance,” said Peter McGoldrick, an analyst at Stifel.
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed morning show, the ‘Powerful actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
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