Nike shares plunged 12% on Friday after the company reported declining sales and a plan to cut costs by $2 billion over the next three years.
The company expects revenue to rise about 1% in the fiscal year ending May 31, below the mid-single digits previously expected.
With shares down 12.9% in midday trading, MarketWatch reported that Nike shares would see their biggest one-day decline since a 13.5% drop in May 1997, when the company also warned of declining sales.
Nike employs 11,400 people at its headquarters near Beaverton, according to its most recent annual report. Many of them own large chunks of Nike shares, which is why Friday's share price drop was particularly painful for the local economy.
The local economy will also soon be affected by corporate layoffs. Nike said Thursday it will incur $400 million to $450 million in restructuring charges in the current quarter, primarily from severance payments. Nike did not return emails from The Oregonian/OregonLive regarding the number of workers the company expects to lay off.
At least three analysts downgraded Nike stock following Thursday's earnings report, with Williams Trading analyst Sam Poser perhaps looking the most pessimistic, arguing that Nike's products “are not as good as they're supposed to be, particularly in the running space.” would have to”.
Nike has lost market share in running, its traditional category, including to Hoka and On.
“Nike continues to lose the edge that was critical to making the company the powerhouse it has become,” Poser wrote.
In a conference call Thursday with stock analysts, Nike CEO John Donahoe and CFO Matt Friend said the company would reinvest money from its cost-cutting plan into product innovation and running, among other things.
The plan satisfied some analysts who said Nike's sales weakness was due to a broader economic slowdown, including in China and Europe, two of the company's top markets.
In an appearance on Yahoo Finance, Aneesha Sherman, a senior analyst at Bernstein, pointed to recent weakness at Under Armour, Lululemon, Skechers and Crocs, suggesting that Nike's problems are not unique.
“I don’t think this suggests any weakness in the Nike brand relative to the competition,” she said. “I wouldn’t interpret this as a fundamental deceleration, particularly from Nike.”
–Matthew Kish; [email protected]