Why Nike Stock Plunged Today


What happened

Shares of Nike (NYSE: NKE) were in freefall today with the wider market as the world’s largest sportswear company announced on Saturday that it would close stores in North America, Western Europe, Australia and New Zealand until to March 27 in order to limit the spread of the coronavirus.

The news came as a number of other retailers like Apple and under protection have taken similar measures, while some chain stores have reduced their opening hours. Nike’s decline corresponded to the S&P500 today, which has collapsed as the COVID-19 outbreak continues to spread across the United States, forcing the closure of schools and businesses and hammering the consumer economy.

Today, Nike ended down 11.6%, which was slightly better than the S&P 500’s 12% decline.

Image source: Nike.

So what

Nike noted that its stores in Japan, South Korea and most of China are still open, but it’s clear the company, one of the world’s biggest consumer brands, will take a financial hit. . the consumer discretionary The sector is particularly vulnerable to the coronavirus pandemic, as consumers in much of the world are urged to stay home to help control the spread of the disease. In other words, physical retail sales, excluding basic necessities like food, are expected to fall sharply in the first half of the year. Meanwhile, the cancellation of virtually all college and professional sports for the foreseeable future is also limiting brand visibility.

Nike should be in a better position than many of its competitors as the company is very profitable, has a strong balance sheet and is a well-known brand that will endure after the current crisis. The company has also gone to great lengths to create its own direct-to-consumer sales pipeline, which includes the SNKRS and Nike apps, where they have seen strong growth in recent quarters.

Now what

Nike stock is now down 32% since the start of the coronavirus-related selloff, roughly in line with the S&P 500’s 28% decline. Although Nike’s bottom (as well as the market’s) may months away, the stock should be a good buy on a recovery. One of the advantages of a bear market is that it allows investors to grab high-quality companies at discounted prices.

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Jeremy Bowman owns shares of Nike. The Motley Fool owns stock and endorses Nike. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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