Share Turnover: Sportswear stock falls 12% as Nike forecast cuts slow spending.
The company also plans to cut costs by $2 billion.
on Thursday
And it said it was adopting a “more cautious approach” to its plans for the rest of the year, blaming the forecast cuts on weakness in its online business and increased promotions.
That sent shares of rivals Adidas and Puma down about 5% each, while Lululemon fell 2% and Under Armor fell about 6% before the bell.
“This ‘margin before sales’ theme is not new across the U.S. retail and wholesale sector. It has become the norm to usher in sales weakness offset by stronger margins and costs as companies clear inventory in a difficult macro environment. Barclays analyst Adrienne Yih said in a note.
Some analysts have said Nike may also lag behind in innovation and lose share to other brands such as Lululemon and Deckers Outdoor’s Hoka. “Nike needs increased and improved marketing investments, while HOKA, On and Lululemon are expanding further with increased customer acquisition and retention,” TD Cowen analysts said after downgrading the stock to ‘market perform’ from ‘outperform’. .
Nike also revealed plans to simplify its product assortment, increase automation and release fresher styles to attract consumer attention.
“We believe this cost-cutting plan is a positive move, but scaling newness and innovation will take time, and soft macros will further pressure results in the meantime,” said Abbie Zvejnieks of Piper Sandler. The securities firm lowered the target price from $112 to $107.
Nike’s forward price-to-earnings ratio for the next 12 months, a common benchmark for stock valuation, is 30.01, compared to Adidas’s 44.48.
(Reporting by Aishwarya Venugopal and Savyata Mishra in Bengaluru; Editing by Dhanya Ann Thoppil and Devika Syamnath)
