The sports footwear manufacturer has been struggling for a while

Over the past two years, Nike has faced a number of challenges, including supply chain disruptions and increased competition in the athletic apparel and footwear market. The company has focused on strengthening its digital channels and expanding online sales as its response to growing e-commerce demand. On the product front, Nike focused on innovation, launching new products and improving its sports technology. The company continued to maintain a strong global presence, focusing on developing its markets in different regions of the world. The US, Europe, the Middle East, Africa and Asia continue to be its main markets, with a focus on tailoring its products and marketing strategies to suit local preferences and trends.

Nike's record share drop

On Friday, Nike's stock saw the biggest one-day plunge in its history, falling nearly 20% after the company released a surprise forecast counting on a decline in annual sales in 2025.* This drop, which reduced the company's market value by $28.41 billion, has raised investor concerns about Nike's effectiveness in battling rising competition from new brands such as On and Hoka. Analysts have pointed out that Nike is trying to set conservative targets that will be easier to beat, but is facing pressure from investors about improving performance, while also believing that it needs to consider possible changes in leadership. The deterioration in the company's prospects has also hit the shares of its competitors in the sportswear and footwear sector. Nike has struggled to adapt its products and cut costs to respond to declining market share and changes in consumer preferences.[1]

New cheaper sneakers

In order to maintain its place in the market, Nike has announced that it will launch a new collection of sneakers in a price range of no more than $100 as part of its strategy to boost sales. The company wants to attract customers with smaller budgets, as its flagship products such as the Air Jordan 1 and Air Force 1 sell for more than $150. With the new price ranges, Nike is trying to respond to pressure from competitors who are successfully reaching customers with more affordable prices. Despite the efforts, analysts warn that the move may not completely solve the deeper problems of lack of innovation and diminished value of some of Nike's key products in the aftermarket.[2]

Economic results

For the fourth quarter of fiscal year 2024 (the period from March 1 to May 31, 2024), Nike reported a revenue of $12.6 billion, down 2% from the previous year, while net income rose 45% to $1.5 billion and earnings per share reached $0.99. For the full fiscal year 2024 (the period from June 1, 2023 to May 31, 2024), revenue increased by 1% to $51.4 billion and net income increased by 12% to $5.7 billion, while earnings per share were $3.73. Nike focused on increasing sales in key regions and introducing new products to attract price-sensitive customers. In 2025, the company expects sales to decline close to 10% and plans to continue to optimize costs and improve its product lines to ensure sustainable long-term growth.[3][4] [1]

Nike's stock performance over the past 5 years. (Source: Google Finance)*

Conclusion

Given the recent fiscal year of 2024 results and market dynamics, Nike faces complex challenges that reflect sales pressures and increasing competition in the sports apparel segment. Although the company achieved modest revenue growth and profitable expansion during the year, quarterly results revealed weaker performance in key markets. The forecast for the 2025 financial year shows that the company is aware of these issues and is preparing for its next strategic steps. In the long term, Nike remains a strong player in the sportswear market with a robust product portfolio and a clear vision to improve performance. Success in the coming months will depend on the effective implementation of these plans and the ability to adapt to rapidly changing market conditions.

Adam Austera, Principal Analyst at Ozios

* Past performance is no guarantee of future results

[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1] https://www.investing.com/news/stock-market-news/nikes-downbeat-outlook-drags-jd-sports-and-puma-briefly-lifts-adidas-3500730

[2] https://www.investing.com/news/stock-market-news/nike-plots-100andless-sneakers-to-lure-priceconscious-shoppers-3501758

[3] https://investors.nike.com/investors/news-events-and-reports/investor-news/investor-news-details/2024/NIKE-Inc.-Reports-Fiscal-2024-Fourth-Quarter-and-Full-Year-Results/default.aspx

[4] https://www.investing.com/news/company-news/nike-price-target-cut-amid-lowered-fy25-guidance-still-outperform-93CH-3501016