Nike’s stock fell 8% on Friday after the Air Jordan maker warned that sales would fall in the first half of the year as it replaced older styles with trendier sneakers, while Lululemon Athletica said demand for its luxury athleisure products had declined. As a result, the stock fell by 17%.
Lululemon’s bleak outlook highlights the retailer’s challenges as rising inflation causes customers to reduce discretionary spending, while Nike’s outlook signals the company’s efforts to compete with emerging brands for market share are doing.
“One of the things that both Lululemon and Nike have enjoyed in recent years is premium prices for premium products, but that seems questionable at this point,” said Brian Mulberry, client portfolio manager at Zacks Investment Management. ” he said. The company invests in Nike.
Nike plans to reduce supply of classic shoes such as the Air Force 1 and Pegasus, finance chief Matt Friend said Thursday, as it looks to revive the running shoe category and future releases such as the Air Max Dn. He said he plans to focus on this.
Meanwhile, Lululemon reported a 9% increase in North American sales in the fourth quarter, a far cry from the 29% increase in the same period last year and the 12% increase from the previous quarter.
“This degree of slowing (in sales growth) in the U.S. raises some concerns regarding market share opportunities,” Piper Sandler analyst Abby Zvezniecs said in a note. The brokerage cut PT from $560 to $525.
Lululemon suffered its worst day in more than four years, while Nike stock hit a six-month low on Friday. Peer Under Armor fell 3%.
Following the results, at least 12 brokerages lowered Nike’s PT, lowering the median price target to $116 from $126 in December. Nike stock last traded at $93.50.
“Until there is evidence in the market that the new product can grow and scale well, this stock will remain controversial and mired,” said Wedbush analyst Tom Nikic. said.
Nike’s forward price/earnings ratio, a common benchmark for stock valuation, is 24.84 times, compared to 52.08 times and 15.31 times for Adidas and Puma, respectively.
At least 17 brokerages have lowered Lululemon’s PT.
