Nike Inc. warned that sales will take a hit as it responds to a growing challenge from upstart running-shoe brands like On and Hoka that have exposed the US sporting goods company’s reliance on classic basketball models such as the Air Force 1.

The world’s largest sportswear retailer expects revenue to fall by low single digits in the first half of its fiscal year, which starts in June. Analysts had projected a 4% rise in the first quarter and a 6% gain in the second, according to estimates compiled by Bloomberg.

Nike shares fell 6.6% in premarket trading, and they’re down 16% for the past 12 months.

Over that period, rival Adidas AG’s shares have gained 40% despite a series of setbacks for the German company, ranging from the demise of its lucrative Yeezy partnership with the rapper Ye to the loss of its long-running sponsorship of the German national football team – which Nike snatched away in a surprise announcement on Thursday.

Both Adidas and Nike face a new threat from the likes of On Holding AG and Hoka, which have been gaining ground among consumers seeking alternatives to the Big Two that have dominated the sneaker business for decades. Adidas, meanwhile, has tapped into fashion-conscious shoppers’ desire for retro styles with revivals of its Samba and Gazelle models.

Nike, which still has a big seller in its classic Air Jordan franchise, said it would shift its sneaker offerings away from some of its most classic styles. To get a sense of just how big of a move that is, Nike’s announcement that it plans to make fewer Air Force 1s and Pegasus running shoes is akin to a company like Louis Vuitton saying it’s going to discontinue its iconic Neverfull handbag or Levi Strauss & Co. moving away from its famous 501 jeans.

Poonam Goyal, an analyst at Bloomberg Intelligence, said Thursday that the weak outlook for the first half of the year “raises eyebrows,” but coming out with new products will be good for the company in the long run.

Nike sees revenue and earnings growing next fiscal year despite the first-half slump, excluding the impact of a multiyear cost-cutting plan in the face of weaker demand for its sneakers and apparel.

“We know Nike’s not performing at our potential,” Chief Executive Officer John Donahoe said on a conference call with analysts. “It’s been clear that we need to make some important adjustments.”

Donahoe outlined a restructuring plan in December to cut $2 billion in costs over the next three years in response to weaker sales. Nike said in February that it would slash 2% of its global workforce as part of the plan, with layoffs to take place over two phases.

Donahoe said his priorities are to refocus on sports, develop more new products faster, boost sales with its wholesale partners and advertise more aggressively. Nike has pumped money into marketing to spur demand, spending $1 billion in the quarter, up 10% from the prior period.

The retailer reported revenue of $12.4 billion for the quarter ended Feb. 29, higher than analysts anticipated, bolstered by better-than-expected sales in North America and Greater China. Nike’s sales in the crucial China growth market rose 4.5% in the quarter. In North America, sales were up 3.2% to $5.07 billion.

Management has also been working to get rid of older merchandise to make room for fresh items after an inventory glut plagued the business last year. Inventories fell 13% to $7.7 billion for the quarter, a bigger decline than Wall Street predicted.

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