Nike: Can the Brand Regain Its Footing After a Challenging Year?
Nike, the world’s largest sportswear brand, is on a mission to regain its stride after a challenging year. A yearslong series of strategic errors led to the company’s worst trading day ever, with shares falling 20% and wiping $28 billion off its market cap.
The company’s struggles began in 2020 when it limited ties with wholesale partners, such as Foot Locker and Dick’s Sporting Goods, in an effort to boost sales from its own platforms and stores. Initially, this strategy saw increased direct sales, but as Covid lockdowns lifted in 2021, Nike’s revenue from direct channels began to stall.
Analysts say Nike’s lack of product innovation and absence from wholesalers allowed newer rivals like Hoka and On Running to gain market share. “That was a mistake,” said Stacey Widlitz, president of SW Retail Advisors. “When you pull back from that channel and withhold some of your best and newest product, someone else comes in and fills those shelves.”
Nike is now dealing with an excess of inventory from sales slowdowns as consumers turn to newer styles from other brands. In its most recent earnings report, the company said it will focus on returning to innovation, centering its marketing on sports and clearing out old inventory through promotions.
With its new CEO, 32-year Nike veteran Elliott Hill, the company is looking to turn things around. “When Nike puts innovation behind their products, they can bring back growth,” said Widlitz. “But it’s going to be a long-term, painful process.”