Nike's Sales Take a Hit as Consumers Shift Away from Expensive Sneakers, Apparel

Nike, the world's largest sportswear company, is struggling with a sharp decline in sales as consumers steer away from expensive sneakers and athletic wear.

The company reported a 9% drop in global sales last quarter, with a notable 17% dip in China and a 9% decline in North America—its largest market.

Despite fears of a steeper decline, Nike's stock managed a 4% uptick in after-hours trading on Thursday, although it remains down about 30% over the past year.

According to CNN, the sportswear giant is facing increasing pressure from changing consumer habits and rising competition from emerging brands like Hoka and On.

Many shoppers are opting for more affordable alternatives, leading to a slowdown in demand for Nike's higher-priced offerings.

The company has also been trying to correct past strategic missteps, including reducing the supply of popular sneakers like the Air Force 1 and Pegasus in an attempt to drive up demand and maintain full-price sales.

Nike's shift toward selling directly to consumers and reducing its reliance on third-party retailers has also contributed to its sales struggles.

In recent years, the company pulled its products from major chains like DSW to prioritize its own online and store channels.

However, the strategy backfired, leading Nike to reinstate some of these retail partnerships. Retail analyst Neil Saunders of GlobalData Retail noted that the company "took it too far and underestimated the importance of third-party retailers."

Nike Bets on CEO Elliott Hill and Kim Kardashian Partnership to Revive Sales

To revive sales and regain momentum, Nike is banking on new CEO Elliott Hill, who rejoined the company last year.

The company is also leveraging high-profile partnerships, including a collaboration with Kim Kardashian's Skims, which is set to launch a women's line in the US this spring, INC said.

Industry experts believe this partnership could help Nike tap into the growing market of fashion-forward activewear and compete with brands like Lululemon and Vuori.

Despite these efforts, Nike continues to face significant challenges. Market research firm Sensor Tower reported a 35% decline in downloads of Nike's mobile apps last quarter, while foot traffic at its stores dropped by 11%.

Retail partner Foot Locker, which relies on Nike products for over 60% of its merchandise, warned that discounting pressures from Nike to clear excess inventory would impact its profit margins in the year ahead.

Nike's third-quarter revenue is projected to fall by 11.5% to $11.01 billion, marking its steepest decline since the 38% drop recorded in the fourth quarter of 2020 during the COVID-19 pandemic. Earnings per share are expected to shrink to 29 cents from 77 cents a year earlier.

While the company has launched new running shoes, including the Pegasus Premium and Vomero 18, and aired its first Super Bowl ad in 27 years, analysts believe more substantial efforts are needed to turn things around.

Morningstar analyst David Swartz stated, "It needs to create a whole new franchise, like a family of products that add billions in sales. That takes years."

Originally published on vcpost.com