Nike Just Can’t Do It Anymore: Why the Athletic Apparel Giant Is Struggling – The Average Joe
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    Nike Just Can’t Do It Anymore: Why the Athletic Apparel Giant Is Struggling

    Noah Weidner

    March 23, 2024

    Nike ($NKE) has been urging the world to “just do it” for decades — but in recent years, it’s been struggling to “do it” in the way investors want. Instead, the athletic apparel and footwear giant has hit a rough patch, with its stock down ~50% from its 2021 peak.

    No running from this: Fluctuating overseas growth, new competition, and uncertainty about its brand direction have weighed on the company’s profit margins and revenue. Despite missing analysts’ expectations for two consecutive quarters, Nike finally managed to exceed holiday sales estimates, with North American sales climbing 3%.

    • However, there’s a significant caveat: Nike anticipates growth to slow to “low single digits” during its next fiscal year, which starts in June.
    • UBS analyst Jay Sole attributes Nike’s challenges to the company’s efforts to expand its own stores and digital network, which have “added complexity and inefficiencies.”

    Not just a Nike problem…

    Dwindling savings may finally be impacting the entire retail sector. Last week, the National Retail Federation said it expects retail sales to increase 2.5-3.5% in 2024, a drop from last year’s 3.6%. Nike’s struggle with product innovation exacerbates its problems as competitors roll out new styles and streetwear (rather than relying on refreshing old styles), capturing consumer attention with trendier and more affordable options.

    • Brands like On ($ONON) and Hoka-owned Deckers ($DECK), up nearly 30% and 40%, respectively, appeal to runners and athletes — convincing the world that ugly shoes are back in style.
    • Even athleisure giant Lululemon ($LULU) faces challenges from dupes and cheaper alternatives, with its stock falling 16% on Friday after reporting earnings.

    Nike needs a solution… fast: Nike says it will raise prices, cut back on inventory, and refocus on wholesale shoe retailers like Foot Locker ($FL), which helped them develop into a mainstay. It also aims to move its inventory away from its iconic Air Force Ones towards more colorful, relaxed styles to draw back the sneakerheads that helped it generate $48.7B in footwear revenue last fiscal year.

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