Nike reported a 10% decline in sales and a 28% drop in profits in the most recent quarter compared to the previous year. The US sportswear giant also warned that sales could fall by another 10% in the current quarter. These developments follow an overproduction of limited Air Jordan models, which have now lost their appeal and must be offered at discounts.
The Nike stock lost more than 4% in after-hours trading following the announcement of the results. Additionally, the company unsettled investors by not providing a forecast for the fiscal year ending on May 31. The current CEO, John Donahoe, will hand over his position on October 14 to longtime Nike veteran Elliott Hill, who is expected to lead the company out of the crisis.
A year ago, Donahoe celebrated the successes of the Air Force 1, Air Jordan 1, and Dunk models, which together contributed to an annual revenue of 51 billion USD. However, due to an excessive expansion of supply, Nike lost the exclusive appeal of its limited editions. Sneakers that used to sell out within seconds are now difficult to sell even on platforms like StockX and GOAT.
Some limited editions are now even appearing at retailers like Foot Locker, where they weren't previously found. Sneaker reseller Anthony Treviso criticized: "Nike has flooded the market with products that no one wants. Demand is not being properly assessed, leading to more and more models remaining on the shelves.
Nike has significantly increased the number of Jordan sneakers released annually in recent years: In 2022 and 2023, more than 700 models were released each year. However, this number will be reduced by about 35% this year, as an analysis of GOAT data shows.
Despite these efforts, demand for new models remains weak. Sales of Air Jordans, one of the company's most profitable products, are declining. In 2023, Nike generated approximately 7 billion USD with the Jordan brand, mainly through the sale of shoes that cost up to 200 USD.
Added to this is the fact that Nike is increasingly losing market share in competition. According to StockX, sales of Nike and Jordan sneakers on the platform decreased by 21% in the first half of 2024, while sales of competing brands like Asics and Adidas rose by 600% and 90%, respectively.
To speed up the innovation pipeline and rekindle enthusiasm for new products, Nike launched the latest model of its Air series, the Air Max DN, this year. However, demand remained subdued: only about 20% of the model has been sold so far on Nike's website — a clear indication that the brand is currently struggling with acceptance issues.
Analysts are concerned about the challenges facing Nike. The company has significantly expanded its production capacity in recent years to meet more demand on its own SNKRS app. However, this strategy has led to an oversupply and a loss of brand exclusivity.
Elliott Hill, who will take over the restructuring in October, was already part of the leadership team in 2017 when Nike faced similar issues with an oversaturated market. Industry experts, however, doubt that Nike currently possesses the same innovative strength as six years ago when the brand set a new standard with the launch of the groundbreaking Vaporfly running shoe.
