What's going on?

Nike�s sales and profit in its most recent quarter were higher than research analysts expected � but its stock fell 2% as the indications for future sales fell well short of expectations.

What does this mean?

Nike is under threat from upstart Under Armour (thank you, Stephen Curry) as well as a resurgent Adidas (which is performing better under new management). Increased competition makes it harder for Nike to charge the premium prices that it usually commands (indeed, its sales were less profitable this quarter, which likely reflects pressure on the prices that Nike can charge). Nike had been a high-flying stock � it was up an average of 26% each year for seven years prior to 2016 � but, like a championship team that�s getting a bit stale at the top, it�s losing its lustre.

Why should I care?

The bigger picture: The sneaker industry isn�t about athletics anymore.
According to a prominent research analyst that covers Nike and its competitors, �80% of sneakers today are being bought with no intention to ever make it to a field or a court.� The �performance� aspect of sneakers, which is typically Nike�s strength, is less appealing as casual brands, like Adidas’ Stan Smith line, gain in popularity. That means more competition and, evidently, less sales growth for Nike.


For the stock: Nike might no longer be considered a growth company � which hurts the value of its stock.

Investors will pay a relatively high price for a stock if they think that the company will increase sales and/or profits substantially in the coming years. Nike had that growth profile for a number of years � which propelled its stock so much higher. But as its sales growth slows, investors are no longer prepared to pay up for future growth � and the stock price goes down both on an absolute level and relative to the company�s profits (i.e. its valuation gets cheaper).