The Dow Jones Industrial Average recently recorded a five-day losing streak, mainly driven by Nike's (NYSE:NKE) huge plunge after a weak earnings report on Wednesday.
The sportswear giant delivered a weak revenue growth at 5% to $8.43 billion missing consensus analyst estimates of $8.47. Investors have taken note of the increasing US market competition from brands such as Adidas (DE:ADSGN) and Under Armour. Despite this, the retailer reported earnings of 68 cents per share, beating expectations of 53 cents per share.
Nike reported a slow sales growth in the U.S for the quarter at 3%, which accounts for 50% of their business, while sales in Asian countries such as China have risen by 9% and 8% in other emerging markets for the quarter.
Just recently, the company launched another effort into extending their products in Asian markets with the launch of their performance hijab for Muslim women. Nike also recently expanded their products into a plus-size line. Both product launches have been received positively by the market.
This has led investors and shareholders to speculate that the company might shift a huge part of their focus to developing and expanding their Asian market. Although this hasn’t been confirmed, Nike did state that they will focus on direct consumer and online in the coming months.
As the company changes its focus, analysts are now predicting that this year may not be the time to expect a recovery from the company has warned further losses in the future. Nike also reported negative futures at 4%, driven by a weak wholesale order and demand for their products in the past quarters.
“To expand our leadership and ignite NIKE’s next phase of growth, we’re delivering a relentless flow of innovation through performance and style, increasing speed throughout the business and creating more direct connections with consumers leveraging digital and membership," said Nike Chief executive Mark Parker.
Still, investors are looking for signs of recovery in the US market as the company’s ineffectiveness to succeed in the US has raised doubts from investors that the company may also lose their consumers from Asian markets if they will not be able to recover in the U.S.
Nike shares fell down until extended trading by as much as 7% as investors digested the earnings report.
In their conference call, the Nike management stated that future orders have declined by 4% compared to last year. Nevertheless, analysts have stated that the company is set to return to their high-single digit revenue growth as soon as Nike starts to see actual returns from their investment in direct-to-consumer marketing and expansion in Asian countries such as China and Taiwan.