(Bloomberg) — Nike Inc. shares fell after the company warned that sales will decline this quarter amid persistent weakness in China and at its Converse brand.
The world’s largest sportswear company expects revenue to be down in the low-single digits in the three months that started Dec. 1, a surprising turn after two straight periods of growth.
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While Nike is making progress, especially in North America and the running category, investors are eager for the company to make headway in other areas of the business that are lagging. Converse sales plunged 30% in the latest quarter, while Greater China was down 17%. Chief Executive Officer Elliott Hill characterized the company’s rebound as “in the middle innings.”
The shares fell as much as 11% on Friday in New York, the biggest intraday decline since April.
The stock had dropped 13% so far this year through Thursday’s close and is headed for its fourth consecutive annual decline. Shares of European rivals Adidas AG and Puma SE also dropped on the news, falling as much as 2.9% and 3.5% respectively on Friday.
After the earnings report, several analysts cut their price targets on Nike. That included Piper Sandler’s Anna Andreeva who said the turnaround is making progress, but it’s slower than expected with recovery in China taking more time.
On the company’s call with analysts, Hill said Nike’s recovery “won’t be a straight line, but we’re acting decisively to accelerate the lagging areas — with China at the top of that list.”
Nike reported declining store traffic in the Greater China region and struggled to sell off older inventory. The company is now focusing on Beijing and Shanghai while refining its product assortment.
“What we’ve done is a start, but it’s not happening at the level or the pace we need to drive wider change,” Hill said, referring to the market.
Over the past two years, China has become a deeply discount-driven market for sportswear, as consumers have curbed spending amid an economic slowdown, a property crisis and job market uncertainties. Nike faces steeper challenges than rivals such as Adidas, local giant Anta, and niche brands like Hoka, having failed to deliver standout products that capture the attention of increasingly sophisticated Chinese consumers, who now place greater value on experiences and niche performance features.
