Nike stock was plunging Friday after the retailer’s better-than-expected second-quarter earnings report was overshadowed by a concerning sales outlook. Two Wall Street analysts have since downgraded their ratings on shares.
In Friday trading,
Nike stock,
down 10% to $109.95, was on pace for its largest percent decline since Sept. 30 last year, according to Dow Jones Market Data.
The selloff comes after the company said on Thursday that it expects sales to soften for the remainder of its fiscal year ending in May. That’s partly due to consumers becoming more cautious with their spending, especially in China and in Europe, according to management commentary Thursday.
To offset that slowdown, Nike said it plans to save $2 billion over the next three years from simplifying its product assortment, adding automation, and reducing management layers, among other actions. The majority of the savings from that plan will be used to fuel growth, Chief Financial Officer Matthew Friend said.
Cowen’s John Kernan on Friday downgraded his rating on Nike’s shares to the equivalent of Hold from Buy and lowered his price target to $104 from $129. CFRA’s Zachary Warring also lowered his rating on shares to Sell from Hold on Friday. Warring’s price target remained the same at $91.
Kernan said there’s no need for investors to pay a higher price for shares per future profit, adding that it remains uncertain when these cost-cutting initiatives will have an effect.
Both cited competition from other brands for their moves. The company faces competition from brands such
Deckers Outdoor
-owned HOKA and On. Both brands are popular among runners.
The majority of Wall Street is still bullish. Citi’s Paul Lejuez and more than 20 other analysts tracking Nike have Buy calls on the stock.
Lejuez in a note on Friday called the selloff in shares “a buying opportunity.” He thinks management is more focused than ever on driving profitability and expects the stock to hit $135.
Barron’s in August named Nike as one of its stock picks.
Write to Karishma Vanjani at [email protected]
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