Nike Is Losing U.S. Market Share, And Future Orders May Be Peaking: Bank Of America Downgrades Stock

Robert F. Ohmes of Bank of America Merrill Lynch believes Nike Inc NKE has been losing share of the footwear market in North America for the first time since 2010.

Ohmes downgraded the rating on the company from Buy to Neutral, while lowering the price target from $72 to $60.

Growth Deceleration

Ohmes mentioned Nike had begun a successful department store channel in 2H14, stocking its products at various retailers. However, after two years of robust double-digit growth, incremental growth in this channel appears to be decelerating.

“Channel checks also indicate elevated Nike product in the off-price and outlet store channels as Nike manages excess inventory levels in the U.S. due to the slowdown in technical footwear and weaker apparel sell-through in Holiday 2015,” the analyst stated.

Related Link: Morgan Stanley Downgrades Nike: Athletic Apparel Is Weakening, Competition Is Increasing

Shift To Lower Price

In addition, Ohmes pointed out that the response to the technical innovations by Nike has been slowing, with customers favoring retro and casual styles over technical platforms, such as Lunar, Free and Air Max.

“Nike footwear growth in North America continues to shift toward lower price point casual and Retro styles including Roshe, Huarache, and Retro Jordan, creating risk of market share loss to other “non-technical” styles from other brands,” according to the Bank of America report.

Although a new platform launch is expected for the Olympics, Ohmes believes “it will take time for that product to have a meaningful commercial impact at retail.”