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Just months after the Ben Affleck-directed film “Air” brought to screens the historic agreement between Nike and an unknown Michael Jordan who had yet to set foot in the NBA, the iconic sportswear brand suffered its longest slide since its IPO in December 1980.
With today’s Wednesday session, the company follows 10 sessions in which it lost more than 11% and pulverized about $18.7 billion in market value amid growing concerns over China’s weak growth and high inventory levels , which affects the profitability of the brand.
Shares continued to fall in today’s session. Towards the end of European markets, the company’s decline (around 4%) to $97 a share deepened after sportswear retailer Foot Locker announced a cut in its expectations for the remainder of the year, causing it to plunge further in the stock market with a Loss of more than 30%. In 2022, this company bought 65% of its sportswear from Nike.
In the annual results presented last June, Nike broke its annual sales record. At the end of the fiscal year in May, the company had net income of $5,070 million (about 4,655 million euros), 16.1% more than the profit for the previous year. It also posted record earnings of $51,217 million, up 10%. However, the company has already disappointed with lower-than-market numbers and full-year prospects. So far this year, the value is down 18%.
The Asian giant’s struggling economic recovery is weighing on the company’s earnings and investor expectations: full-year sales in China were $7.248 million, down 4% year-on-year.
“The market is recognizing that growth in China will be slower,” Matt Maley, chief market strategist at Miller Tabak +Co, told Bloomberg. For this reason, savers are eagerly awaiting the presentation of the company’s results on September 29th. Currently, most analysts (61%) recommend buying their shares, 26.8% recommend holding and 12.2% recommend selling. Furthermore, they indicate a potential of 25.4% up to $127.25.
Goldman Sachs is one of the companies that maintains its Nike stock buying board. In particular, they underline the company’s ability to gain market share through innovations in certain product categories, such as running. Therefore, they give a target price of $145. However, they acknowledge that the heavy exposure to the Chinese market could threaten Nike’s financial results given the country’s slowing GDP growth and concerns over the real estate market. In addition, they warn that ongoing problems in supply chain and inventory management could hurt sales and margins.
Luck seems to have turned its back on Nike on the football fields as well. In last Sunday’s Women’s World Cup final, Nike sponsored the English team while Adidas sponsored Spain, who ended up lifting the trophy. Beyond the pride of victory, there is much more at stake for brands at these events: a multi-million dollar increase in sales fueled by the joy of fans
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