Nike, Foot Locker, Finish Line downgrades highlight struggles in the sporting goods sector

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Analysts went on a downgrading and price-cutting spree in the sporting goods sector as some of the biggest names in the athletic arena – from Nike Inc. to Foot Locker Inc. – struggle to clear hurdles created by changing tastes and buying habits.

The rating and price-target changes came from many directions, but all expressed concerns that both brands and retailers will be challenged to show sales growth, earnings increases, and market share expansion.

“Nike remains a top brand in a solid industry, but our mosaic of five data sources suggests growth and margins are at risk ahead,” Jefferies analysts led by Randal Konik said in a Monday note.

Jefferies cites data showing Adidas AG ADS, -0.79% is snapping up website visits, market share, and brand share of top-selling running merchandise. Analysts also say Adidas is coming up more on earnings calls for retailers like Foot Locker FL, -6.22%   and Finish Line Inc. FINL, -8.81% indicating the threat it poses. 

Read: Foot Locker shares plunge 28% as brands like Nike and Adidas go direct-to-consumer

“Nike NKE, -2.86%   has become increasingly expensive, with shares trading near historical averages, despite a more muted near-term growth profile,” Jefferies wrote.

Adidas has roared back in North America, analysts said, with the company’s retro styles driving growth in the region. Jefferies estimates that the Stan Smith and Super Stars sneakers accounted for about €290 million, or 19%, of North American Adidas sales in 2016.

That retro trend has cooled in 2017, but the brand hasn’t.