Nike stock declines 20%, biggest fall in 13 years; What led to the plunge?

Shares of Nike Inc. lost $27 billion in market value, falling the most in 13 years due to growing criticism of a continued sales slowdown.

The shares plunged 20 per cent on Friday's trading session at 11:57 a.m. This was Nike's biggest fall since 2001. The shoemaker's stock has declined 17 per cent over the past year.

Nike's Chief Executive Officer John Donahoe and the management team have been facing growing criticism from Wall Street over the company's revenue slump. 

Nike, the world’s largest sportswear company has been seeing a revenue decline to the mid-single digits in the company’s current fiscal year, while investors had expected an increase.

This has increased concerns about waning demand and increasing competition from upstarts On and Hoka, as well as Nike's longtime rival Adidas AG.

"Management credibility is severely challenged, and potential for C-level regime change adds further uncertainty,” said Jim Duffy, an analyst at Stifel in a research note on Friday morning quoted by Bloomberg.

“The incredibly gloomy fiscal 2025 guidance has increased pressure on management significantly," said Neil Saunders, managing director at GlobalData. "Management has tried to sell a story of improvement to investors, but is not prepared to back it up with positive forecasts.”

Donahoe created a restructuring plan for Nike in December to cut $2 billion in costs over three years due to the weak sales. This includes cutting jobs globally by 2 per cent, including layoffs at its Oregon headquarters and its European hub outside Amsterdam.

Donahoe describes the current fiscal year as a “transition year” for Nike as it kickstarts a 'multiyear' cycle of introducing new products, focusing on increasing the speed at getting products to consumers. Yet analysts still voiced concerns that new products could take too long to arrive.

Evercore analysts including Michael Binetti told Bloomberg that “truly transformational products won’t be scaled until” autumn of 2025.