Nike's powerhouse labels loose footing against upstart brands - analysts
By Savyata Mishra and Aishwarya Venugopal
(Reuters) -Nike is starting to lose share to upstart sneaker brands such as On and Hoka and will need to invest in fresher styles, analysts said on Friday, after the sportswear giant trimmed its annual sales forecast and sent shares tumbling 11%.
The Air Jordan 1 shoe maker mainly blamed cautious consumer spending for the downbeat forecast on Thursday and laid out a $2 billion cost-saving program, signaling a shift in strategy to focus on profitability over sales growth.
European rivals Adidas (OTC:ADDYY) and Puma closed 5% and 7% lower, respectively, while shares of Lululemon (NASDAQ:LULU) and Under Armour (NYSE:UA) fell about 1% and 4%.
"Nike (NYSE:NKE) needs increased and improved marketing investments while HOKA, On and Lululemon are scaling further with increased customer acquisition and retention," TD Cowen analysts said after downgrading the stock to «market perform» from «outperform».
Nike also said it would incur about $400 million to $450 million in employee severance costs in the current quarter, but did not specify the number of jobs it would cut.
The company, which had 83,700 employees at the end of May this year, did not immediately respond to a request for comment about the job cuts. In 2022, Nike had 79,100 employees.
The company unveiled plans to simplify its product assortment, increase automation, and scale product innovation in the women's and Jordan categories, as well as on products priced below $100, particularly in the running category.
«I think it makes sense for them to focus on fewer number of products that can resonate stronger with consumers. And doing so will help them not only manage their inventory, but also their profitability,» Raymond James
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