Nike posted a record streak of losses as concerns over a sluggish recovery for Chinese consumers and rising merchandise inventories continued to weigh on profitability across the activewear industry.
The stock fell 1.4% to $101.46 on Tuesday, marking its ninth straight session of losses and its longest losing streak since the company’s December 1980 IPO. The latest drop came after retailer and Nike customer Dick’s Sporting Goods reported disappointing fiscal second-quarter results.and cut Its profit outlook this year is partly due to an increase in its shoplifting.
Nike’s weakness comes in line with growing signs of a rebound in consumer weakness in China, a key growth market for the athletic gear giant.Growth of total retail sales of consumer goods in China decelerated It was 2.5% in July, below the median forecast of 4%.
“Investors are realizing that growth in China is going to slow,” said Matt Maley, chief market strategist at Miller Tabak + Co. They also realize that China isn’t going to do as much as it has in the past. The past approach, he said, was to foster growth.
The slump has wiped nearly $13 billion off Nike’s market value, which currently stands at $155 billion. Even before its latest plunge, Nike had failed to keep pace with the broader market’s gains. The index has fallen 13% this year, while the S&P 500 consumer discretionary index has soared 29%.
In its latest quarterly results released at the end of June, Nike report Earnings per share came in slightly below analyst expectations, suggesting the company is still trying to sell excess inventory at a discount. Its outlook for the year also failed to win over Wall Street.
Wedbush analyst Tom Nikic said recent earnings reports from Under Armor Inc. and Champion parent Hanesbrands Inc. could raise concerns among investors about persistently high inventory levels at sportswear companies and promotions negatively impacting their margins.
He expects Wednesday’s earnings report from Foot Locker Inc., which is due to report its next earnings report at the end of September, to be an important signal for Nike. Foot Locker often provides details about how its brand is doing, he said. In 2022, 65% of the retailer’s athletic merchandise purchases will be from Nike.
Like most analysts tracked by Bloomberg, Nikic has an outperform rating on Nike stock. Nike has 25 Buy ratings, 11 Hold ratings, and 5 Sell ratings, and the average analyst price target of $127 implies a return potential of about 26% over the next year.
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