Nike Stock Slides Amid Concerns Over China’s Slow Consumer Recovery
Nike, the global sportswear giant, has seen its stock slide as concerns grow over China’s sluggish consumer recovery. The company recorded a record streak of losses, with its stock falling for a ninth consecutive session, the longest losing streak since its IPO in 1980. On Tuesday, the stock slid 1.4% to $101.46. The recent drop came after Dick’s Sporting Goods, a retailer and Nike customer, reported disappointing fiscal second-quarter results, citing increased theft at its stores.
The decline in Nike’s stock comes as China’s retail sales growth decelerates, raising worries about the country’s economic rebound. In July, China’s retail sales growth slowed to 2.5%, worse than the expected forecast of 4%. Analysts believe that investors are starting to realize that China’s growth will be slower, and the country will not be as proactive in boosting economic expansion as it has been in the past.
The prolonged drop in Nike’s stock has resulted in a loss of nearly $13 billion in market value. Despite its recent slump, Nike had already been struggling to keep pace with the broader market. Year-to-date, the company’s stock is down 13%, while the S&P 500 Consumer Discretionary Index has surged 29%.
Nike’s most recent quarterly results, released in June, showed earnings per share that fell slightly short of analysts’ expectations. This signaled that the company is still working on selling off excess inventory through discounted prices. Additionally, Nike’s outlook for the current year failed to impress Wall Street.
Analysts point to the earnings reports from other athleticwear companies like Under Armour Inc. and Hanesbrands Inc. as contributing to investor concerns about high inventory levels. The negative impact of promotions on profit margins is also a worrying factor for investors.
Upcoming earnings reports, including Foot Locker Inc.’s report on Wednesday, will provide further insight into Nike’s performance. Foot Locker, a major Nike retailer, often provides details about the performance of its brands. In 2022, the company purchased 65% of its athletic merchandise from Nike. Analysts believe that these reports will be important indicators of Nike’s future performance.
Despite the recent challenges, the majority of analysts tracked by Bloomberg still maintain an outperform rating on Nike’s shares. The company has 25 buy ratings, 11 holds, and five sells, with an average analyst price target of $127. This indicates a potential return of about 26% over the next year.
In conclusion, Nike’s stock decline reflects growing concerns over China’s slow consumer recovery. As the company faces challenges in selling excess inventory and profit margins, investors are closely watching upcoming earnings reports for signals of Nike’s future performance. However, analysts remain optimistic about the company’s long-term outlook.
