Shares of Nike Inc touched a 2-1/2-year low on Friday and rattled prices of other sports equipment makers, after the company’s warning of falling profit margins as widespread price declines dented prices. raised concerns about the spread of elevated inventories throughout the industry.
The World’s Largest Place sports clothing On Thursday, the manufacturer became the latest in a group of consumer brands and retailers to highlight the pressure on margins from raising discounts, as companies rush to phase out goods. excess inventory amid slowing demand.
Nike said it expected full-year gross margins to fall 200-250 basis points, also affected by a stronger dollar.
Analysts warn Nike’s negative update could mean margin pressures across the broader retail sector as a whole could be worse than feared.
“The Nike drop increases the group’s risk of catching a cold,” said Baird analyst Jonathan Komp. “Given Nike’s (updated and) plan to aggressively liquidate off-season merchandise over the next two quarters, we see a risk that the industry as a whole becomes more promotional as a result.”
Nike stock was last down nearly 10% at $86 and is expected to drop about $15 billion in market value, if losses are sustained throughout the session.
Shares below Armor fell 7.3%, while German peers Adidas and Puma fell 5% and 8.3% respectively.
“Nike’s promotions and prospects bode well for the guidance of Under Armor, Adidas, Puma and others in the sports arena,” said Cowen analyst John Kernan. , the Cowen analyst said, adding that he forecast to cut these brands.
The average stock rating of 36 brokerages including Nike is “buy” and the average price target is $115, down from $130 a month ago.