Thanks for Visiting!

Register for free to get the full story.

Sign Up
Already have a Placer.ai account? Log In
Back to The Anchor

Nike: When the Marathon Turns Into a 100 Mile Ultra Through a Desert

Thomas Paulson
Sep 30, 2022
Nike: When the Marathon Turns Into a 100 Mile Ultra Through a Desert

In the past we have written about: (1) the intensifying competition in athletic apparel and footwear, the substantial market share gains by Lululemon, On Running, and HOKA, and too much new product hitting the market; (2) the shift in consumption from pandemic-winning categories to out-of-home experience; (3) the inventory overhang of goods held up in extended supply chains and on retailer balance sheets; and (4) the faltering in economic and consumer mojo in China. All of these heavily weighed on Nike’s August-quarter results and outlook. Moreover, all of this is a negative readthrough for Lululemon, Adidas, Under Armour, Athleta, Allbirds and others.

  • For North America, Nike reported +17% growth in footwear and +5% growth in apparel. Store traffic was positive double-digit and wholesale revenue grew low double digits with "strong growth" from strategic partners such as Dick's Sporting Goods, JD Sports, and Finish Line. (Foot Locker was conspicuously absent from the call-out--recall that Nike pulled its apparel and running product out of Foot Locker earlier this year.) China was down 16% and Europe was up only 1% due to the decline in the Euro.
  • Nike CFO Matt Friend stated that "North America [is] shifting once again. Earlier ordering by retailers, driven by strong consumer demand and less predictable delivery timelines, had led to elevated inventory levels broadly across consumer goods. Transit times began to rapidly improve with signals that further improvement may be coming. At the same time, consumers are facing greater economic uncertainty, and promotional activity across the marketplace is accelerating, especially in apparel. As a result, we faced a new degree of complexity. Demand for Nike, Jordan and Converse continues to be uniquely strong with positive consumer response and high full price realization on fresh seasonal assortments and key product franchises. In September, month-to-date retail sales are up double digits versus the prior year [with traffic and sell-throughs accelerating], following a strong back-to-school season."
  • Friend also noted that Nike's "North America inventory grew 65% versus the prior year…as a result, we are taking decisive action to clear excess inventory, focusing on specific pockets of seasonally late products, predominantly in apparel. While we expect this to have a transitory impact on gross margins this fiscal year, we believe this cost will be far outweighed by the benefit of clearing marketplace capacity to align seasonally relevant product, storytelling and retail experiences for the consumer." (Recall that Target made a similar announcement in May, with other retailers also following.)
  • As shown in the figures below, Placer.a’s data supports Nike’s strong retail traffic and trends which are up YoY on a one-year basis and three-year basis. However, we suspect that the traffic commentary is more reflective of Nike’s full-price stores and big tourist hubs (which were down in 2021 due to the pandemic) versus factory stores (which are down YoY, which is consistent with visitation trends at factory stores across the industry).

 

Schedule a Call

Required
Please enter your email
Required
Required

Thanks for reaching out!

I’ll be in touch soon

Go Back
Oops! Something went wrong while submitting the form.

Thomas Paulson

Director of Research and Business Development, Placer.ai

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

Schedule a Call
Related Articles