How Nike Ran Into Trouble

this should be a golden moment for Nike its iconic trademark adorning apparel worn by hundreds of athletes and immortalized on dozens of podiums but off camera the 60-year-old company is stumbling Nike has been one of those growth companies that has really worked well it's been a surprise to investors who hadn't really seen this coming for the fiscal fourth quarter it looks like a Miss pretty much across the board this is the first real time that you're seeing Nike really struggle with competition Nike's market value nosedived over the past few years and is worth more than

a hundred billion less now than during The Last Summer Olympic Games meanwhile arch nemesis Adidas well it's fared better let's say in spite of its own pretty serious public relations headaches it's almost like an inverse relationship that we've seen at the two top at leisure Brands globally it's such a competitive space it's it's as6 it's hoker so how did Nike run into trouble January 1964 it saw numerous influential births including Jeff Bezos and Michelle Obama and slightly less literally Nike and through Innovation Partnerships and some iconic marketing it's dominated sportsware ever since these three words

made up the slogan to beat just do it Nike is very good with telling stories they happen to have like great athletes on their roster people felt good in it and they felt like they were closer to their Idols like Michael Jordan and for much of Nike's life that relationship relied on foot traffic in stores but over the last decade the company began to ask itself do we really need these guys when Nike CEO John Dono started back in 2020 he was brought on to really modernize Nike's online operations so that's the app the e-commerce

store because donaho came from eBay that's one of the biggest e-commerce companies ever but then when the pandemic hit everything went online right so it was all e-commerce it was all buying off apps it was all Amazon everything like that I have this app called sneakers app and they release the limited releases they were all dropped in this app and in a few top tier stores people really moved toward more casual clothing and that included sneakers we stopped going to work we didn't have to wear formal shoes anymore high heels slowed down these are things

we didn't have to wear and we didn't want to wear cuz they're not as comfortable as casual sneakers products like these or these comfortable cool and wildly popular with Shoppers donaho pointed to the results as proof his strategy was working and started cutting those ties with retailers but I think that Nike wanted to make digital be 60% of their business and within their DTC which is digital and stores they wanted it to be more balanced what that meant for a company like Foot Locker is that suddenly they need to become less reliant on Nike and

they have to go out and find other brands that'll fill that space so like Hoka or an or Adidas or anything else that they can have that can take that shelf space and they can present to Consumers which was advantageous for smaller Rivals trying to muscle in on an incumbent market share and it's part of what's Driven this surge in investor appetite for the shares of on and hoker parent company Deckers as the world reopened it turned out people still quite liked buying shoes in stores but Nike just wasn't in as many of them now

instead Shoppers discovered those Rivals and upstarts with fresh Innovative new Styles they've been craving we know that there's a cyclical Trend in retail away from bricks and mortar and towards technology but it looks like Nike just pivoted too fast into Tech Nikes lean into lifestyle Brands like the Air Force Ones and dunks paid off during the pandemic but its lack of fresh offerings also now became apparent it started with the dunk at first everybody wanted to have them and then they started to releasing them every day day almost in different colors there was nothing new

just hundreds of different colorways it was kind of like done and uh the hip was done this is a story of misfires being masked by a pandemic sales boom Nike didn't Bank on needing so many Retail Partners once lockdowns ended and by sidelining them the company freed up shelf space for Rivals to show off the Innovative Styles it didn't have that's what propelled Nike into such a position that it ended up issuing a profit warning early in 2024 prompting the biggest single day drop in its share price on record but here's the thing the Nike

brand is powerful and the company is still the world's largest sportsware retailer that gives it a solid foundation from which to turn things round it started by rehiring 30-year veteran Nike executive Tom Petty who' retired 4 years earlier and with one goal rebuild relationships with retailers and now it needs to give those stores something exciting to put on shelves it's going to take some time which is why Don AO told investors the next year will be a transition for the business but it's towards a comeback for the brand he said has already started it just

needs to bring forward more newness across its line of products focusing more aggressively on running and lifestyle because that is where it's lagged and where those pesky Rivals an and hoker in particular have been exciting leg Centric Fitness enthusiasts donaho described running as a competitive battlefield but one the company's going to fight with Innovation and a major marketing push it's one of the reasons this year's summer games are key for the company or in donoho's corporate speak a pinnacle moment to communicate our vision of sport to the world it's brand exposure to probably the largest

viewership in history and of Nike Innovation translating to medals a bunch of its athletes LeBron Kevin Durant these are the kinds of big names that need to win at the Summer Olympics for this to be a success for them [Music] [Music]