Nike stock dragged on the Dow Jones industrials Monday, after a downgrade Sunday. The downgrade follows a tough week for fast-moving footwear stocks, which stumbled over last week's string of weaker-than-expected sales forecasts during earnings. Foot Locker had a host of price-target cuts after its disappointing Q1 results Friday sent shares spiraling. As an industry group, shoe stocks had opened the year in a four-month rally.
Nike Stock Downgrade
Williams Trading downgraded Nike to sell from hold on Sunday and slashed its price target for Nike stock. The firm wrote that Nike's U.S. business has become "far more difficult than what was expected" when it reported its major Q3 earnings beat in late March. Meanwhile, the company's recovery in China "appears to be choppy."
Williams Trading noted the downgrade is based on the U.S. business, which it believes will be challenged through at least the first half of fiscal 2024. Meanwhile, Nike lacks new compelling products while consumers may be becoming trained to look for promotions, according to the firm. Williams Trading slashed its price target for Nike stock to 95 from 120.
NKE stock fell nearly 4% Monday following the downgrade, the largest decline among Dow Jones Industrial issues. Nike shares trading in a flat base with a 131.41 buy point, and just above their early November highs.
Foot Locker Price Cut, Downgrade
Foot Locker also saw a host of price-target cuts Monday following its earnings miss Friday.
Citi downgraded FL stock to neutral from a buy rating and cut its price target. In a research note, the firm wrote it failed to appreciate the economic sensitivity of Foot Locker's customer base at a time when consumer spending is slowing. Citi noted that management's plans are disruptive to the business when customers are already price sensitive and the U.S. athletic market is "unhealthy."
In March, Foot Locker revealed its "Lace-Up" strategy to revamp its real estate footprint and brand, and to close down underperforming stores.
Meanwhile, Williams Trading followed up its Nike stock downgrade by cutting Foot Locker shares to sell from hold Sunday. The firm said Foot Locker's reduced guidance builds in some improvements from current trends late this year. But Williams Trading believes the outlook "will likely still prove too aggressive," particularly on gross margin, given the company's "bloated inventory levels." Williams Trading slashed its FL stock price target to 25 from 38.
Bank of America, Baird, TD Cowen and Morgan Stanley lowered their Foot Locker price targets on Sunday and Monday, with the reduced targets ranging from 26 to 36.
FL stock tumbled another 8.5% to 27.63 Monday following the slew of target cuts. Shares spiraled on Friday, carving 27% lower during trading following the earnings report.
Crocs slid 1.7% Monday after swooning 5.5% Friday after the Foot Locker earnings.
Skechers traded 1.4% lower Monday, after a 3.9% decline on Friday.
On Holding climbed 3% Monday to regain some its losses after earnings last Tuesday. ONON stock tumbled 19% last week after forecasting sales growth slowing in the second half of the year despite earnings tripling for its Q1 report.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison.
