Nike outlook weighs on sports retail sector
Shares in JD Sports (LSE:JD.) fell around 2% on Wednesday after sportswear giant Nike (NYSE:NKE) warned that its turnaround remains a work in progress, with further revenue declines expected as weakness in China continues to weigh on performance.
Nike reported a 1% decline in fiscal fourth-quarter revenue and said sales are likely to fall further during the first half of fiscal 2027 as it continues to navigate intense competition and elevated inventory levels.
Better-than-expected earnings fail to reassure investors
Although Nike’s quarterly revenue came in slightly ahead of market expectations, the results did little to convince investors that the recovery strategy introduced by Chief Executive Elliott Hill nearly two years ago is gaining sufficient momentum.
Nike shares have fallen around 35% since the start of the year and were down a further 3% in pre-market trading on Wednesday following the earnings release.
China remains the biggest challenge
Greater China continued to be Nike’s weakest-performing region, with sales declining 17% on a constant currency basis during the quarter, compared with a 10% fall in the previous reporting period.
While the result was slightly better than Nike’s earlier forecast for a 20% decline, the company continues to lose market share to domestic competitors as consumers respond to stronger local product offerings. Greater China represents roughly 15% of Nike’s annual revenue and remains its third-largest market.
Elsewhere, North American revenue increased 3%, supported by efforts to rebuild relationships with wholesale partners after the previous management team shifted its strategy towards direct-to-consumer sales.
Nike also exceeded earnings expectations, reporting adjusted earnings of 20 cents per share, ahead of analysts’ consensus forecast of 13 cents, according to LSEG.
Leave a Reply