Nike's got a target on its back.
The world's largest athletic gear maker on Tuesday reported yet another quarter of stellar earnings -- its 22 percent year-over-year growth in adjusted EPS flew past Wall Street's 9 percent estimate and marked seven consecutive quarters of double-digit earnings growth. But the company's stock dropped by more than 4 percent in after-market trading.
In fact, while Nike's stock has soared by 27 percent in the past year, some of its competitors have actually done better. For instance, shares in Adidas have risen by 43 percent during the same time.
At $8 billion in revenue for the quarter ended Feb. 29, Nike reported slightly lower sales than Wall Street expected. Investors also remain concerned about a pullback in the U.S. market -- growth in future orders (Nike's estimates for wholesale orders for the next six months, an important demand indicator) was 10 percent, instead of the 12 percent Wall Street expected. Its fiscal 2017 guidance came in lower than what investors expected. Plus, Nike beating earnings estimates wasn't really a surprise: Nike has missed Wall Street estimates only three times since 2005.
It's not uncommon to play the estimate game well; companies in the S&P 500 index surpass Wall Street's estimates about 70 percent of the time, according to Bloomberg data covering the past 10 years. But Nike is unusually consistent -- at times a little boring, even, as its sales climb steadily higher.
Much of that has to do with Nike's dominant position in the market; it brings in more annual revenue than Adidas, Under Armour, Lululemon and Skechers combined. Its marketing prowess, including its ability to attract top celebrities to pitch its goods around the world, has so far been unmatched.
But Nike has been helped over the past decade by a lack of substantive competition. It no longer has that luxury.
For the first time in years, it seems Adidas has woken up. With a new CEO, high-profile partnerships with celebrities such as Kanye West and plans to increase sales at the fastest pace in five years, the German sportswear retailer is starting to regain its cool.
Lululemon, putting its see-through yoga pants behind it, is mounting a comeback. And Under Armour, once a tiny underdog out of Baltimore, is basking in the success (and sales) of its wildly popular line of Stephen Curry basketball sneakers. Curry is the new king of sneaker sales, while Nike-endorsed players such as LeBron James, Kobe Bryant and Kevin Durant seem to be falling out of favor with a younger generation of sneaker heads.
Meanwhile, Skechers has snapped up the lower end of the market, becoming to the sportswear industry what Forever 21 is to apparel companies, "quickly finding out what the consumer wants and coming out with a reasonably priced product in 20 different styles and colors," Andy Annunziata, an analyst for research firm Sports One Source, told Gadfly.
With more than $30 billion in annual sales and control of 50 percent of the footwear market, Nike remains the unquestioned leader in global sportswear. And with the 2016 Olympics coming this summer, it's unlikely Nike will fall from grace anytime soon. But even giants eventually start to feel it when upstarts bite at their heels.
Correction: Nike commands about 50 percent of the footwear market, according to research firm Sports One Source. An earlier version of this story incorrectly said it controlled 90 percent of the market.
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