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New York – Nike fell in early trading after its sales and orders missed estimates, renewing concerns that competitors will hamstring growth at the world’s largest sports brand.
The company’s so-called futures orders increased 11%, Beaverton, Oregon-based Nike said on Tuesday. Analysts projected 13%, according to Consensus Metrix. The number, which excludes currency fluctuations, is a key benchmark for investors because it serves as an indicator of demand.
After years of robust growth, Nike is facing challenges on several fronts. The strong US dollar is hurting sales overseas, and footwear competition is mounting. Under Armour is making headway in Nike’s long time stronghold of basketball shoes, while a revived Adidas is encroaching on the running-sneaker segment. That’s raising concern about Nike’s plan to reach $50bn in revenue by 2020, up from about $32bn now.
The shares fell as much as 3.9% to $51 in early trading in New York on Wednesday. Nike already had slid 15% this year through Tuesday’s close, dragged down by concerns about a slowdown.
Nike surged 30% in 2015, the biggest gain of any company in the Dow Jones Industrial Average.
"A lot of the initial fears investors had about the increasing competitive landscape, specifically around this quarter, actually came true," said Chen Grazutis, an analyst at Bloomberg Intelligence.
Revenue misses
Fourth-quarter revenue climbed 6% to $8.24bn, missing the $8.28bn predicted by analysts. Earnings were flat from a year earlier, at 49 cents a share, though the number did exceed the 48-cent average estimate.
Despite the lacklustre quarter, Nike reiterated that sales would gain at a high-single-digit percentage this fiscal year. That takes into account the latest volatility in currency markets, the company said.
For years, Nike was in the enviable position of being a market leader in sneakers with little competition. Adidas was floundering, and Under Armour’s shoe business hadn’t yet gained traction.
But times are different now. Stephen Curry’s basketball shoes have given Under Armour a foothold in that category. Nike still has more than 90% of the North American basketball sneaker market, but it’s losing share to Under Armour, according to SportsOneSource.
Running shoes
And in running shoes - both in the performance and fashion categories - Adidas has had a major US comeback.
Running sneakers are especially critical because they’re increasingly worn as casual shoes, whereas basketball footwear has fallen out of favour. The challenges now facing Nike were highlighted by retailer Finish Line last week when chief executive officer Sam Sato heaped praise on Adidas and Under Armour, calling the performance of both brands “explosive.”
Nike’s results in North America showed how much this competition is hurting it. Sales last quarter were little changed at about $3.7bn. Orders for that region also missed estimates.
In addition, Nike has endured a management shake-up in recent months. Michael Spillane was named president of product and merchandising, making him a legitimate candidate to one day replace chief executive officer Mark Parker.
The reshuffling also hit the company’s basketball business.
Michael Jackson, head of global basketball, resigned earlier this month and was replaced by Craig Zanon.
