(Reuters) – Nike shares slipped nearly 6% premarket on Friday after the sportswear giant warned of another quarter of sales decline, leaving some investors worried about the pace of a crucial turnaround under new CEO Elliott Hill.
The company on Thursday forecast a steeper-than-expected drop in fourth-quarter revenue and also reported a 17% slump in China quarterly sales amid weaker discretionary spending in the country.
Hill – who took on the role in October to help the sportswear maker regain lost market share – has laid out what he called a “Win Now” strategy, which includes boosting on-the-ground presence in five key cities including Shanghai and Beijing.
“It is too early to be confident in the turnaround,” Sheraz Mian, director of research at Zacks Investment Research, said.
The new management will take time to rebuild relations with other retailers that were weakened by its focus on selling directly via its stores and website and develop a more compelling line of products, he said.
Nike shares are down about 11% since Hill’s CEO announcement in September, giving up all the gains following his appointment.
To be sure, Hill has fast-tracked certain sneaker launches such as Pegasus premium and Vomero 18 that helped lift sales in the reported third quarter. Still, Nike is working to move past the previous management’s strategy missteps that led to a lack of innovation for its product lines.
Nike’s Chief Financial Officer Matthew Friend said the company would take “several quarters” to clear out its dated stock, which would involve margin-hitting discounts.
“Nike is emerging from quite a deep hole from prior management in terms of excess inventory, lack of innovation and brand equity, which we expect will take multiple seasons to correct,” Barclays analyst Adrienne Yih said.
Analysts at Barclays also projected that the earliest they foresee a turnaround is in the second half of Nike’s fiscal year ending May 2026.
The company’s forward price-to-earnings ratio for the next 12 months, a benchmark for valuing stocks, was 30.08, compared with 17.33 for Deckers and 25.91 for Adidas.
“We continue to like the recovery story but don’t expect to see much short-term progress,” Bernstein analysts said.
(Reporting by Aishwarya Venugopal and Ananya Mariam Rajesh in Bengaluru; Editing by Sriraj Kalluvila)
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