The world’s largest sportswear brand reported sluggish growth as a result of rising competition, a consumer pullback in its key markets, and missteps in strategy.
Nike’s sales grew 1% last year and were level last quarter, the organization announced Thursday June 27. As the company’s classic brands slow down and Nike faces challenges in the online marketplace, the company anticipates a 10% drop in sales in the next quarter.
Nike (NKE) stock plunged 12% during late night trading.
Nike faces a buyer lull for optional products and intense competition from upstart running brands like Hoka and On.
Customers are changing their behavior by substituting purchases of expensive sneakers and athletic clothing for basics and experiences such as concerts and travel.
Nike is also up against new rivals. Hoka, a French company that started out as a running shoe for hard-core marathoners but quickly became popular with the general public. Hoka is expanding because it prioritizes comfort over traditional style.
Hoka One One, the latter part of which is pronounced “oh-nay, oh-nay,” has established itself in the market by producing trail running shoes with thick soles intended to provide maximum cushioning.
In recent years, the company has reduced the number of traditional retailers it sells to in favor of growing directly through its own channels, particularly online. Nike has said it can create over two times the gain selling products through its own site and actual stores than it can through discount partners.
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Nike has stated that it will concentrate its resources, marketing, and top products on just 40 select retail partners, including Foot Locker and Dick’s Sporting Goods.
In any case, the change appears to hurt the organization’s sales. Some of the retailers Nike initially excluded have since been reinstated.
GlobalData Retail analyst Neil Saunders claims that Nike went too far and underestimated the significance of third-party retailers. These retailers could now work more closely with other brands as a result of this withdrawal.
