In a sneaker market that’s changing at a faster pace than a gold medal sprinter, the world’s largest sportswear maker is trying to keep up.
What happened: Nike lowered its revenue forecast and announced a US$2 billion savings plan as slowing sales eat into profits. To cut costs, Nike plans to simplify products, increase automation, and “streamline” its organization (read: exec-speak for “layoffs”).
Zoom out: As consumer dollars dry up, the main growth driver in the sneaker market is the running shoe category, where upstart brands like Hoka, On, and Salomon have lapped industry vets — luring in dedicated fans with their funky styles and high-tech cushy designs.
- Hoka and On, in particular, have thrived. Shares for their parent companies are up ~78% and ~65% on the year, respectively. Compare that to Nike’s shares, which have dropped ~8%.
- To compete, Nike plans to put some shine on the old Swoosh, focusing on “fresher” styles and re-investing in categories doing the strongest: women’s running and the Jordan brand.
Bottom line: Nike’s cost cuts are a clear sign for the entire sportswear market that the spending slowdown will creep well into 2024. However, new products and a Paris Olympics bump could get consumers to open their wallets. If the kicks are cool enough, that is.—QH