Nike might still be the most dominant player in the athletic footwear industry, but the company’s latest earnings report is causing concern among investors.
The Oregon-based company reported its fiscal 2016 fourth quarter and full year results Tuesday, and while revenue was up, it missed investor estimates, causing shares to drop 3.9% to $51 on Wednesday morning in New York.
Nike reported a 6 percent sales growth to $8.24 billion for the quarter, but analysts surveyed by Bloomberg said they expected growth to $8.27 billion. More concerning for the brand was its reported future orders, a key metric used to gauge demand for the coming months. Nike reported futures orders increased 11 percent, but this fell short of the 13 percent expected by analysts.
Nike is currently fending off challenges on several fronts. A stronger U.S. dollar is eating into its overseas revenue, while competitors like Under Armour and Adidas are rapidly gaining ground in both the basketball and running shoe segments, raising concern as to whether Nike can still hit its goal of $50 billion in revenue by 2020. For fiscal year 2016, sales were up 6 percent to $32.4 billion.
“A lot of the initial fears investors had about the increasing competitive landscape, specifically around this quarter, actually came true,” said Chen Grazutis, an analyst at Bloomberg Intelligence.
Nike may also be a victim of its own success. While it is the top maker of basketball sneakers, athleisure-minded consumers are overlooking basketball sneakers for everyday wear, turning instead to running shoes, which are seen as more casual. Highlighting this point, Nike replaced its former head of global basketball Michael Jackson earlier this month, announcing Craig Zanon would take on the role.
Despite this, Nike remained bullish in its report, calling fiscal 2016 “a breakthrough year.” The company said it expects growth in the “mid single digits”, slightly lower than the 9 percent growth projected by analysts.