Designers, Here’s How Nike’s 20% Stock Drop Matters to Us

 

Nike recently announced its quarterly results and while the numbers were far from disastrous, they didn’t exactly wow Wall Street either. Nike reported $12.6 billion in revenue, while analysts expected $12.84 billion. 

Ok, not too bad, right? 

Nike’s quarterly profit was also up by an impressive 46% year-on-year, reaching $1.5 billion. 

That’s also great, right? Yes, but there’s a plot twist. 

Nike also said it anticipates a 10% sales decline for the ongoing quarter and an annual drop of around 5%. The challenges with online sales, slower wholesale orders, and a softer outlook in Greater China are among the reasons why the company had to revise its plans. Analysts, on the other hand, were expecting Nike’s 2025 sales to rebound and slightly increase. 

Ouch. 

As circumstances changed, investors quickly reassessed their positions, and it wasn’t good news for Nike’s stock. It slumped 20%, marking the worst decline in the company's history. As of writing earlier this week, it has not yet found its way up. 

Nike’s wild stock ride might leave many people scratching their heads: how can the price drop so dramatically even for successful and profitable businesses? 

The answer lies in forecasting and market expectations.

How Forecasting Shapes Market Movements

Forecasting is all about predicting future sales and market conditions. Companies use these predictions to set goals and strategies, while investors and analysts use them to decide whether to buy or sell stocks. They typically consider revenue projections, costs, and market trends to estimate expected value. If forecasts are promising, stock prices rise. If disappointing, like with Nike, they take a hit. Simple, right?

For example, imagine an investor looking at a tech company. Analysts predict $10 million in revenue for next quarter, but the company says it expects only $7 million. The investor’s model, based on the higher forecast, valued the stock at $50 per share. With the lower forecast, the model now values the stock at $35 per share. This leads to a sell-off, causing the stock price to drop. 

There are many, many real-world instances where missed forecasts resulted in stock drops. Here are just a few notable examples: 

Why This Matters for Designers

Now, why should designers care about missed forecasts and stock price swings? 

Well, the fact is that understanding these concepts can help us stay ahead of market trends and better align our work with business goals. Plus, it’s super important for those of us working in public companies to keep up with the financial dynamics. Let's dive into the key points:

  • Tuning Into Earnings Calls: If we design for a public company, earnings calls are like a crystal ball. They reveal how the company is performing and its future plans. This can guide our design priorities, ensuring they match the company’s direction, and making our work more relevant and impactful.

  • Aligning With Strategy: By understanding the company’s forecasts — in public markets or not — we can align our projects with the strategic goals. For example, if there’s a push for digital sales, we can focus on improving the online user experience. Or, if the company is expanding into new markets, we can tailor our designs to resonate with those specific audiences. 

  • Building Client Confidence: Knowing market trends and forecasts also helps us build trust with clients. We not only create innovative designs but also show we're tuned into the business landscape. This knowledge can improve our credibility and demonstrate we’re strategic partners who understand the broader market context.

In the wild world of stock markets, where a single forecast can sway billions, designers who are savvy about market trends and company goals are invaluable. By understanding how forecasting works, we can better handle market shifts and guide our projects to success. In other words: by staying informed, we stay ahead!

 
Alen FaljicComment