Nike Inc. (NKE) is facing mounting troubles, and sales could fall further, according to Wedbush.
Why Nike shares are falling
Shares of Nike are down 11% in midday trading on Friday, after Wedbush downgraded the stock to underperform from neutral, and slashed its price target to $80 from $100.
“Nike is facing a number of headwinds, including slowing demand in China, increased competition, and supply chain disruptions,” Wedbush analyst Tom Nikic wrote in a note to clients. “We believe these headwinds will continue to weigh on Nike’s results in the near term.”
Nikic also noted that Nike’s inventory levels are high, and that the company may need to offer discounts to clear out excess inventory.
Nike’s struggles in China
China is a key market for Nike, but the company has been facing challenges there in recent months. The Chinese economy has been slowing down, and there has been a growing backlash against foreign brands.
In December, Nike reported that sales in China fell 8% in its fiscal second quarter. The company said that the decline was due to a number of factors, including COVID-19 lockdowns and increased competition from local brands.
Nike’s sneaker business is also struggling
Nike’s sneaker business is also facing challenges. Demand for sneakers has been slowing down, and the company is facing increased competition from other brands, such as Adidas AG (ADS.DE).
In December, Nike reported that sales of sneakers fell 3% in its fiscal second quarter. The company said that the decline was due to a number of factors, including a slowdown in demand and increased competition.
“We believe Nike’s sneaker business is facing a number of headwinds, and that sales could fall further in the near term,” Nikic wrote.
What’s next for Nike?
Nike is taking steps to address its challenges. The company is investing in new products and technologies, and it is working to improve its supply chain. It is also trying to strengthen its brand in China.
However, Nikic believes that Nike’s challenges are significant, and that it will take time for the company to turn things around.
“We believe Nike is facing a number of significant challenges, and that it will take time for the company to turn things around,” Nikic wrote. “We are downgrading our rating on Nike to underperform, and we are lowering our price target to $80.”