Throughout the year, Nike has managed to beat the consensus revenue and earnings estimates. However, the stock price has tumbled by almost 20% since its August high. The company has recently been struggling with increased competition from a resurgent Adidas and is facing pressure from Under Armour in its basketball division in North America. This has affected Nike’s revenue growth over the last few quarters. Future orders in the year were down year over year. This has greatly affected investor sentiment. All in all, this was not the best year for the leading sportswear manufacturer.
Future Orders Suffered Throughout The Year
Nike’s future orders have come in lower than expected in every quarter this year. The latest quarter witnessed the lowest future orders in the last five quarters. Future orders are a key metric used to gauge sales in the coming quarters; it is directly indicative of the demand for Nike products. To put this into perspective, in 2015, 87% of Nike’s wholesale footwear shipments were made through future orders, as was 67% of Nike’s U.S. wholesale apparel.
As mentioned previously, Nike dealt with intense competition in the footwear market, primarily from Adidas and Under Armour, throughout the year. In the basketball segment specifically, Under Armour has emerged as a major competitor driven by Stephen Curry’s popularity. The Curry series of basketball shoes has been selling much better in the last few quarters than Nike’s Jordan or LeBron series. This forced the company to release cheaper variants of its KD and LeBron shoes in an effort to regain some of the lost market share, even though this move dented margins.
Adidas has primarily scored with fashion shoes promoted by celebrities such as Kanye West. In June, Adidas expanded its partnership with this artist, who moved to the company from Nike in 2013 due to creative differences. In the first quarter of FY 2017, Adidas managed to post a 31% increase in sales of footwear in North America, driven primarily by its Yeezy designs and retro shoes.
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