Nike Inc. is currently facing a historic losing streak as concerns continue to grow about China’s slow consumer recovery and the high levels of inventory in the activewear industry. This decline is significant as Nike’s stock has fallen for nine consecutive sessions, marking its longest losing streak since it went public in 1980. The most recent drop in stock price came after Dick’s Sporting Goods reported disappointing results and lowered its profit outlook for the year, partially attributing it to increased theft at its stores.

The decline in Nike’s stock coincides with indications of a sluggish consumer rebound in China, which is a critical growth market for the company. China’s retail sales growth in July was lower than expected at 2.5%, compared to the projected 4%. This has led investors to realize that China’s growth will be slower and that the country may not take the same measures as before to stimulate growth.

As a result of the stock decline, Nike’s market value has dropped by nearly $14 billion, bringing it down to $154 billion. Even prior to this slump, Nike had been underperforming compared to the broader market. Currently, the stock is down 14% this year, while the S&P 500 Consumer Discretionary Index has seen a 29% surge.

Nike’s most recent quarterly results slightly fell short of analysts’ expectations, indicating that the company is still working on selling off excess inventory through discounts. Additionally, the outlook for the current year failed to impress Wall Street. Investors have become concerned about the high inventory levels in the athleticwear industry and the negative impact on profit margins from promotions, following recent earnings reports from Under Armour and Hanesbrands. The upcoming earnings report from Foot Locker is anticipated to provide crucial insights into Nike’s performance since Foot Locker heavily relies on Nike for its athletic merchandise.

Despite the challenges Nike is facing, the majority of analysts still maintain an outperform rating on Nike shares. Currently, the company has 25 buy ratings, 11 holds, and five sells, with an average price target of $127, suggesting a potential return of 26% over the next year. Nike’s next earnings report is scheduled for late September.

Useful links:
Nike Slumps as Dick’s Sporting Woes Bode Poorly for Athletics
Nike’s Downbeat Outlook Haunts US Sportswear Stocks