Nike Hits A Five-Year Low as A Sales Fall Prediction Casts Doubt on Plans for A Speedy Recovery

Concerns over the speed of a significant turnaround at the sportswear behemoth under new CEO Elliott Hill were raised by a warning of another quarter of declining sales, which caused Nike shares to finish down 5.7% and hit a five-year low on Friday.

Due to lower discretionary spending in China, the firm announced a 17% decline in quarterly sales and predicted a steeper-than-expected decline in fourth-quarter revenue on Thursday.

Hill, who joined the firm in October to help it recover its lost market share, has outlined what he dubbed a “Win Now” plan to increase its physical presence in five strategic locations, including Beijing and Shanghai.

“The plan is there, (but) they are just not seeing results yet,” stated Jay Woods, the lead global strategist at Freedom Capital Markets, an investment banking company. Nike’s chief financial officer, Matthew Friend, said it would require “several quarters” to purchase its outdated inventory, which would entail steep price reductions.

After markets closed on Friday, the market value of the Dow component dropped to $106 billion, and its shares fell to $67.94. After a 30% decline in 2024, Nike’s stock has lost around 10.3% of its value this year. During the company’s results call on Thursday, executives emphasized the necessity of quickening the pace in China, a significant growing market affecting sales for over two years.

“In China, product innovation is the most significant geographic factor. Therefore, product novelty will continue to be crucial for them to begin to see stabilization,” stated Mari Shor, senior equities analyst at Nike investor Columbia Threadneedle Investments.

Hill accelerated the release of several shoe models, such as the Vomero 18 and Pegasus Premium, which helped the business report a lower-than-expected quarterly sales and earnings decline. Nevertheless, Nike wants to go past the strategic errors made by the previous administration, which prevented its product lines from becoming innovative.

Since Hill was named CEO in September, the company’s shares have lost all of the gains that followed his hiring, falling more than 22%. According to John Nagle, chief investment officer of Kavar Capital Partners, which owns Nike shares, long-term owners have long been willing to wait for good outcomes, even if nothing in the CEOs’ remarks indicated they would happen anytime soon.

“This is going to be a multiple-year process,” Nagle said. According to Barclays analysts, a recovery is expected as early as the second half of Nike’s fiscal year, which ends in May 2026. As a standard for company valuation, Nike’s forward price-to-earnings ratio for the upcoming year was 31.08, Deckers’ was 17.33, and Adidas’ was 25.91. Morningstar analyst David Swartz said, “We’re still in the early stages of the turnaround; it is taking longer than anticipated, perhaps, but not that surprising.”