Adidas and Puma shares, plus Dick's and JD Sports, slump after Nike's warning

By Louis Goss

Shares in the world's top sportswear companies slumped on Friday after apparel giant Nike lowered its sales forecasts, warning of a drop in consumer spending, and outlined plans to achieve $2 billion in cost cuts over the next three years.

Shares of Adidas (XE:ADS) (ADDYY)and Puma (XE:PUM), as well as Dick's Sporting Goods (DKS) and JD Sports Fashion (UK:JD), fell on Friday after shares in Nike (NKE) tumbled 12% during Thursday's after-hours trading session, following publication of its fourth-quarter results.

Adidas shares were down 6% on Friday in German trading, having surged 46% over the previous year. Puma shares dropped 5%, having fallen by 7% over the past 12 months.

Dick's shares were down more than 1.5% as Friday trading kicked off on Wall Street.

The share-price drops followed Nike's decision to lower its guidance for the year ending in May, due to an anticipated drop in consumer spending, which threatens to trip up the sportswear sector's revenues.

Nike said it now expects its full-year revenue to grow by just 1%, compared with its previous guidance for mid-single-digit growth.

In an earnings call on Thursday, Nike's chief financial officer, Matt Friend, explained that the company is "seeing indications of more cautious consumer behavior around the world in an uneven macro environment."

Nike noted that retail sales fell short of expectations in the second quarter, particularly in relation to Nike's online retail business. The CFO also warned that macroeconomic headwinds, particularly in the company's Greater China and Europe, Middle East and Africa regions, are likely to impact the sportswear company's sales in the coming quarter.

Nike said that while sales were "incredibly strong" during major consumer moments - including its strongest Black Friday ever - sales were softer than in prior quarters in the periods between those major moments.

In response, Nike outlined plans for $2 billion in cost savings, including by increasing automation and cutting staff, over the next three years. The Beaverton, Ore.-headquartered company has reportedly already begun laying off staff, according to the Portland newspaper the Oregonian.

Nike's lower forecast signals hard times for the sportswear industry as downturns in the world's major economies are expected to hit consumer spending.

Analysts at Citi led by Monique Pollard, however, said that Adidas may be less impacted than its rival, due to the German company's greater focus on more resilient wholesale markets over more unpredictable direct-to-customer sales.

-Louis Goss

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12-22-23 0946ET

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