Nike’s biggest one-day stock ‘plunge’ since 1987 market crash. 📉 Nike reported their fourth quarter earnings last week, beating Wall Street earnings (EPS) expectations but falling short on revenue. Nike cited China and Europe volatile consumer behaviour as chief causes, with annual sales slowing to 2010 levels (excluding the Covid pandemic). The company painted a grim picture of their current quarter sales, anticipating a 10% sales decline.

Following the news, investor confidence sent Nike’s stock plummeting 19.98% within a day. This is a drop off from their 3-month high of US$96.81 to US$73.05 today - a total fall of 24.54%, with year-to-date stock down 32.72%, and year-over-year down 30.07%, with Nike’s market cap sitting at US$110.259 billion.

The all-American brand might have ruffled investors’ feathers, but they still have the backing of the Nike founder, who last week said:

‘I am optimistic in Nike’s future and John Donahoe has my unwavering confidence and full support.’ — Phil Knight, Nike co-founder

Has Nike’s innovation kept up pace? 🏃‍♀️

Nike faces a ‘very tough’ competitive environment. 👟 In April, Bank of America (BAC) upgraded Nike stock from ‘neutral’ to ‘buy’ after previewing the company’s quarterly results. While they expected surprises from Nike’s Q4 announcements, BofA analyst Lorraine Hutchinson told CNBC that ‘this was a much bigger reset than we’d expected’. 

She clarified BofA’s longer-term confidence in Nike’, highlighting the company’s:

• ‘Aggressive actions’ to clear sluggishly moving lifestyle inventory off their direct to consumer (DTC) digital channels after they’d previously shifted focus away from wholesale activity with Dick’s Sporting Goods (DKS) and Foot Locker (FL) —  a move that ‘didn’t pan out’ 
• Cutting US$2 billion in costs; and investing US$1 billion in consumer activities such as the Olympics and partnerships with elite athletes
• ‘Huge wave of innovation’ showing positive product and market testing, with outcomes expected to show later in the year; and investing in new people to lead fresh innovation 
• Strength of their US business despite missing sales expectations there as well as China, Europe, Middle East and Africa 

Upstart competitors advance on legacy brands. 🏃 Not all analysts agree with BofA’s assessment. Wedbush analyst Tom Nikic, a specialist in footwear and apparel equities, blamed Nike’s ‘lack of product innovation over the years, while you’ve had a slew of new brands and existing brands such as New Balance, having strong innovation’. He addressed new market players, Hoka and On, adding that, ‘Adidas is coming on strong once again’.  

• Hoka One One, aka HOKA, is the French/Californian brand named from te Reo Māori verb ‘to soar, or fly’ and owned by Deckers Brands (DECK) — also owners off Ugg and Teva
• On Running, founded by six-time Swiss Ironman champion Olivier Bernhard, who created the cushioned-landing footwear brand after a career that caused Achilles’ issues. On has a market cap of US$11.878 billion, and listed in the year of 1035 IPOs, in September 2021, where their stock peaked in mid-November then fell 72%. Today, On stock is up 5.08% since listing on the NYSE, is up 18.36% year-over-year (YOY) and has climbed 37.93% year-to-date (YTD)

Nike vs Adidas ⚽

German-founded brand Adidas (ADS.DE) lost in a head-to-head battle for sponsorship of Euro 2024 strips, with Nike coming out on top with nine teams wearing Nike — now famously followed by the host-country’s loss to Spain seeing them miss the Euro 2024 semifinals altogether. Adidas earlier suffered another killer blow being knocked out by Nike as sponsor of the German team, starting in 2027. But Adidas is winning where it matters, in consumer sales:

‘Nike’s fortunes are in stark contrast with those of its German rival, Adidas, which just a few months ago raised its revenue and profit expectations, thanks in no small part to its contentious Yeezy collection. It thinks it will end the year at about €700 million in operating profit, compared with a previous forecast of €500 million.’ — Lauren Almeida, The Times

Could the Olympics bring gold for Nike? 🥇

Air Jordan 6 Retro Olympic comeback. 🇺🇸 The Paris summer Olympics open on 26 July, with more than 10,000 athletes aiming for a place on the podium. While Nike isn’t an official Olympic sponsor — like Coca-Cola (KO) and Anheuser-Busch InBev (BUD) with zero-alcohol beer, Corona Cero — they hope to benefit from the Olympic Committee’s Rule 40 pilot programme that allows them to post on social media, where they plan to engage younger consumers. 

‘The Paris Olympics offers us a pinnacle moment to communicate our vision of sport to the world. We can't wait to bring all this Olympics product to life across the games and in more than 8,000 doors worldwide. And throughout, our brand storytelling will be bold and clear, with sport and athletes at the very center of it all, from brand voice to retail activations.’ — John Donahoe, Nike CEO

Not only has Nike created a sub-US$100 sneaker to entice the consumer dollar, but the Dow-listed sporting giant is bringing back their ‘patriotic red, white and blue’ Air Jordan at the tailend of the Olympics — a sneaker not seen since 2000 — and a ‘first-of-its-kind’ breakdancing sneaker.

Nike’s Olympic push started in April, flying 400 media and investors, in a show of strength to launch their Paris 2024 campaign. There they showcased the US team uniforms, featuring 40 athletes, including Serena Williams, Sha’Carri Richardson and Eliud Kipchoge, and an ‘AI-generated interpretation of Air tech’. 

BofA’s Hutchinson said last week that Nike stock has historically benefited from Olympic exposure and suggests it’s likely again this year. Typically, Nike sales bump up 9.9% during an Olympic quarter vs the average quarterly lift of 7.9%. But if Nike’s own guidance of a 10% drop in sales in the current quarter eventuates, it would be a first in an Olympic year for the company since 2000.

Kiwi brands are backing Black

We’re going for gold. 🏄‍♀️ Backing the Kiwi team are NZX-listed companies, including Ryman Healthcare (RYM), Sky TV (SKT), The Warehouse Group (WHS), and My Food Bag (MFB). The New Zealand Olympic Committee relies on these commercial partnerships, which accounted for around 42% of their income in 2023. Sponsorship enables Kiwi athletes to get to Paris (and Tahiti), and helps fund training and competing in the lead-up to the apex event.

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