Nike tumbles to five-year low as sales decline forecast clouds quick turnaround hopes

By Ananya Mariam Rajesh and Aishwarya Venugopal

(Reuters) -Nike shares fell more than 9% to their lowest since the pandemic on Friday after a warning of another quarter of sales decline sparked worries about the pace of a crucial turnaround at the sportswear giant under new CEO Elliott Hill.

The company on Thursday forecast a steeper-than-expected drop in fourth-quarter revenue and also reported a 17% slump in quarterly sales in China amid weaker discretionary spending in the country.

Hill - who took on the role in October to help the company regain lost market share - has laid out what he called a "Win Now" strategy, which includes boosting on-the-ground presence in five key cities such as Shanghai and Beijing.

"The plan is there, (but) they are just not seeing results yet," said Jay Woods, chief global strategist at investment banking firm Freedom Capital Markets.

Nike's chief financial officer, Matthew Friend, also said it would take "several quarters" to clear out its dated stock, which would involve margin-hitting discounts.

The Dow component's shares hit $65.17 in early trading on Friday, with the market value slipping below $100 billion for the first time since March 2020 during the COVID-19 pandemic.

They have lost 5% of their value so far this year following a 30% plunge in 2024.

To be sure, Hill has fast-tracked certain sneaker launches such as Pegasus Premium and Vomero 18 that helped Nike post a smaller-than-expected drop in quarterly revenue and profit.

Still, Nike is working to move past the previous management's strategy missteps that led to a lack of innovation for its product lines.

The shares are down about 11% since Hill's CEO announcement in September, giving up all the gains following his appointment.

The new management is also trying to rebuild relations with other retailers that were weakened by its focus on selling directly via its own stores and website.

Nothing in the executives' comments suggested positive results soon, but long-term shareholders have long been prepared to wait, said John Nagle, chief investment officer of Kavar Capital Partners, which holds Nike shares.

"This is going to be a multiple-year process," Nagle said.

Barclays analysts projected the earliest they foresee a turnaround is in the second half of Nike's fiscal year ending May 2026.

Nike's forward price-to-earnings ratio for the next 12 months, a benchmark for valuing stocks, was 30.08, compared with 17.33 for Deckers and 25.91 for Adidas.

At least 10 brokerages cut their price targets on Nike stock. TD Cowen was the most bearish, cutting by $10 to $65.

"We're in the early stage of the turnaround still, it is taking longer than anticipated, perhaps, but not that surprising," Morningstar analyst David Swartz said.

(Reporting by Aishwarya Venugopal and Ananya Mariam Rajesh in Bengaluru and Nicholas P. Brown in New York; Editing by Sriraj Kalluvila)