Nike just isn’t doing it for Wall Street right now.
The sneaker giant’s shares tumbled Wednesday after it reported a 22 percent decline in quarterly profits, driven in part by a 3 percent sales decline in North America, its biggest market by far. In particular, the company is relying heavily on promotional pricing in the U.S., where German competitor Adidas has been resurgent the last few years.
Earlier this month, Adidas passed Nike’s Brand Jordan to become the second-most popular sport footwear line in the U.S., according to NPD Group, a market research firm. “This is an achievement I never thought I would see in my lifetime,” analyst Matt Powell tweeted when he announced the news.
Nike shares were down more than 3 percent in late afternoon trading Wednesday. For the year, it’s up just 2 percent, versus a 27 percent gain for Adidas in European trading.
Nike’s North American business, which racked up $3.9 billion in revenue for the three-month period ending Aug. 31, is still more than triple the size of Adidas’s in absolute terms. But Nike will face an uphill battle in the months ahead to make sure its lead doesn’t dwindle further, considering Adidas grew North American sales by nearly 30 percent in its most recent quarter.
Other key details:
- Adidas has generally relied less than Nike on endorsements by famous athletes for its marketing. But Yahoo’s Daniel Roberts points out that here’s a heated debate among sneakerheads over how much of Adidas’s U.S. surge has been driven by its partnership with rapper Kanye West. Adidas produces West’s custom Yeezy footwear in limited supply, so it’s clearly not moving the company’s aggregate quarterly results much. But Yeezy fans argue the cool factor bestowed on Adidas is of much greater long-term value than the numbers suggest.
- China was a bright spot in Nike’s otherwise downbeat report Wednesday. Sales there were up 9 percent for the recent quarter.
- Nike is one of 30 components of the Dow Jones Industrial Average, the grandaddy of all yardsticks for the broader stock market. The shoemaker’s woes kept the average in check Wednesday, but it nevertheless managed a 63-point gain in recent trading thanks to gains in J.P. Morgan Chase, United Technologies, and Microsoft, among others.