To put it mildly, Nike has had a challenging and heavily scrutinized past year. And while some of that scrutiny is fair, it’s also overplayed in our view. Supportive of that view, readers will know that we frequently use Los Angeles visits as a proxy for measuring brand/fashion heat both because of Los Angeles’ large size and the large number of influencers in the market. Nike has several retail banners, and the Nike Collective is its multi-category format (i.e., a good venue for assessing brand heat compared to the bargain hunter-driven factory stores or tourist-driven NikeTown). The company operates seven Nike Collective locations in Los Angeles, and our platform has data on six. Three of the six have been operating since the Fall 2022. Below we show the 52-week rolling trend to these versus lululemon’s locations in Los Angeles. (lululemon is a good comp to the Collective in our opinion). As shown, Nike’s visits have climbed +18% since Fall 2022 versus +11% for lululemon. Looking at all six locations for the past year, visits are up +36%. These suggest that Nike’s brand heat remains strong and growing.
We also looked at visitation data for the Nike Collective location at the Irvine Center, which opened May 2023. Nike Collective has grown visits and maintained its market share despite Irvine Center also having Alo Yoga and Beyond Yoga stores, two brands that are frequently mentioned as challengers to both Nike and Lululemon.
On its earnings call this week, Nike CFO Matt Friend said, “In North America, [revenue was] up double digits this quarter with Running specialty partners, and our holiday and spring order books will build on that strength. We also just launched a new campaign, one of our biggest Running brand investments in years, which will carry into fall and holiday. So far, consumer engagement has been very strong. Meanwhile, our ground game activations are creating energy and running communities around the world. In addition, our Pegasus 41 launch showed the impact that we create when we launch new ideas at scale, delivering mid-teens growth above last year's Pegasus model...Looking more broadly across our product portfolio, particularly in footwear, we see clear indications of progress in accelerating newness and innovation. Q1 revenue from new footwear products was up strong double digits versus the prior year. This includes multiple franchises that have scaled quickly based on unit growth over the past 12 months. As we look to the spring season, contribution from newness and innovation will take a significant step forward with growth in footwear units of mid- to high single digits versus the prior year. And over the coming seasons, we expect to see sequential gains and the percentage of newness and innovation as a mix of our total footwear business.” Fleet Feet is the largest specialty running chain, and visits are tracking around the +5% year-over-year rate (below).
Friend went on to say, “In addition, we are investing with our partners to elevate and differentiate our brand in retail. For example, last year, we partnered with Dick's Sporting Goods to introduce an elevated women's fitness concept, which is generating impressive year-over-year comparisons in pilot doors. We also teamed up with Foot Locker to introduce a new concept, Home Court, in their doors with a shared vision to deliver a fresh, new multi-brand basketball experience. By bringing the best of Nike, we create sport-inspired distinction for consumers and deliver attractive returns for both Nike and our partners. Together, we shape the kind of retail environments that drive competitive separation and segment the marketplace for growth, enabling us to serve consumers through strong assortments with full expression across each dimension of our portfolio.” (These bolder shop-in-shops have been a building theme across retail which we've frequently discussed in the past. We'd expect Nike to bring more of them to other retailers.)
We also see such pinnacle brand expressions resulting in increased visits; the chart below shows that Dick’s House of Sports drives nearly 2 times the number of visits than a conventional Dick’s store, which is up from 1.85 times last year. (House of Sports locations are nearly 2-3 times larger than the conventional prototype). We recently looked at how Dick's innovative brand partnerships and new store formats were helping to drive visit share gains in the sporting goods retail category.
