Nike dropped in early trading after third-quarter sales missed estimates, giving fuel to critics who say it’s losing ground to competitors Adidas and Under Armour.
Revenue rose 5 percent to $8.43 billion, the Beaverton, Ore.-based company said after the market closed on Tuesday. Analysts estimated $8.47 billion, on average.
Under Armour and a resurgent Adidas have been grabbing market share from Nike, especially in the U.S. That’s caused investors to sour on the stock, which had its first annual decline in eight years last year.
And last quarter’s results only reinforced the company’s woes as sales in North America rose only 3 percent.
Executives on a conference didn’t provide much reason for optimism, either. Worldwide futures orders, excluding the effects of currency exchange-rate fluctuations, fell 1 percent. Analysts had expected a 3.4 percent gain.
Nike shares slid as much as 6.4 percent to $54.32 in premarket trading Wednesday. They had dropped 10 percent in the past year through Tuesday’s close.
“This quarter doesn’t give any further confidence that they can get back to” sales growth rates of the past, said Brian Yarbrough, an analyst for Edward Jones. “They are going to have to get North America growing north of 3 percent again.”
Nike’s profit rose to 68 cents a share in the three months ended Feb. 28. Analysts projected 53 cents. Still, its gross margin, another key metric of profitability, narrowed by 1.4 percentage points. That’s more than the contraction of 1 point to 1.25 points that Chief Financial Officer Andrew Campion projected on a conference call in December.
High expectations
Nike set high expectations in October 2015 when it forecast annual sales would hit $50 billion by the end of fiscal 2020, a little more than three years from now. That projection equated to it maintaining annual growth rates of 10 percent. But it hasn’t reached that level since.
A lot has changed since Nike made that forecast. In January, President Donald Trump exited a trade deal that Nike publicly advocated for because it would have cut its costs. Competition has also only gotten more fierce. Fashion is currently stuck on the so-called “athleisure” trend in which sporty gear is being worn more often. While that’s been good for Nike, it’s also revived Adidas and brought an influx of brands into the category.
Nike’s 2020 projection depended on doubling its women’s business to $11 billion. That area has been especially vibrant with non-sports brands and retailers like Old Navy introducing athleisure lines.
