After a blockbuster run, is Nike Inc. finally tapering off?
That continues to be the question posed by market watchers and other experts as they followed Nike’s business progression over the past 12 months. The athletic giant racked up nearly $31 billion in revenues in fiscal year 2015 with consistent double-digit growth in future orders, but in 2016 analysts bemoaned the firm’s sluggish North America sales growth, slipping futures and lukewarm shares.
While experts generally seem to believe that Nike’s market cap will remain uncontested for some time, they have raised concerns about key areas where the brand leaves much to be desired for the time being.
Here are three of them.
Fueled by fears surrounding a basketball slowdown and ramped-up competition, Nike’s shares have slipped roughly 18 percent in 2016. Once the hottest stock on the athletic market block, the brand’s shares are receiving an increasing number of negative rating from analysts.
“Investor pushback has focused on the deceleration in North America and global futures over the last two quarters, whether a softer basketball business puts Nike’s long-term guidance at risk,” Citi Research analyst Kate McShane explained in a note Monday.
Nevertheless, some market watchers — including McShane — contend that fears surrounding the stock could be overdone.
“While we acknowledge some of the market’s concerns, we also recognize how shortsighted they are,” Susquehanna Financial LLLP analyst Sam Poser wrote Monday. “The core underpinnings that make Nike a premier global athletic brand are still well in place.”
Over the past 18 months, Adidas and Under Armour have made significant gains in the athletic market and have arguably taken some market share from Nike, particularly in North America.
Nike’s slowing worldwide futures orders — up just 5 percent (or 7 percent currency-neutral) in the most recent quarter — seem to validate concerns that demand for the brand’s wares are slipping as the popularity of its competitors gains.
By many accounts, Nike remains the athletic category’s chief innovator, but some analysts have suggested that consumers are seeking more fresh and unique offerings from the firm.
“Nike is a fantastic company — we don’t dispute that — however, we believe a significant brand shift is underway that could persist for the next one to two years before reversing,” Canaccord Genuity Inc. analyst Camilo Lyon wrote on Oct. 13. “Both Adidas and Under Armour are getting stronger, while Nike is suffering from an innovation lull and retailers are responding in kind by allocating more shelf space to Adidas and UA.”