Three years ago, it was essentially impossible to buy Nike Air Jordan 1 Highs on the company’s SNKRS app. The high-tops would sell out in seconds—sometimes fractions of a second—and later pop up on resale sites at a hiked price. Nike drops were a cultish event in which thousands of sneakerheads would wait at their laptops, fingers poised to click “buy” on their favorite shoe models faster than other “hypebeasts,” and usually end up disappointed. Jordan 1 Highs sold for a staggering 61% premium on the resale platform StockX in 2020. In 2021, the craze was still going strong, with resold Jordans available at a 50% premium.
But in the first half of 2023, the Nike high has faded, and those Jordans now resell at an average 2% discount. And Nike stock, which hit a $177.51 record high in November 2021, has tanked 37% from its peak. What’s more, the company is sitting on $8.5 billion in unsold inventory, according to its fourth quarter earnings report for 2023—that’s $1.6 billion higher than what it said were “healthy inventory levels” in its fourth quarter report in 2021.
Analysts are accordingly lowering expectations for Nike’s performance for the rest of this year. Goldman Sachs downgraded its earnings per share forecast for Nike from $0.69 to $0.66 in a June note, citing “slower retail sales trends through the spring selling season.” Likewise, Morgan Stanley lowered its forecast for the stock from $130 to $127 in its June note, but maintained Nike’s overweight rating.
Why isn’t Nike regaining its stride? Competitors are outpacing the iconic brand, and prolonged inflation is making consumers more careful with their money. And it has two unlikely competitors, in the form of French sporting brands Salomon and Hoka, which have stormed the sneaker market and become StockX’s fastest-growing of 2022. Salomon enjoyed a 2,277% growth in trade, while Hoka saw 713% growth, according to the online sneaker reseller.
Both of these shoes fall into the category of “ugly,” chunky sneakers that began trending during the pandemic and have grown in popularity since. Part of the wide appeal of these sneakers is their functionality. Originally designed for comfort when running and walking, and not necessarily for fashion, Salomon and Hoka shoes are popular with serious runners and hikers; nurses and waiters who work on their feet; and now young, fashion-savvy Gen Zers and millennials.
The shoes’ oversize soles and fat silhouettes are now in vogue (and literally in Vogue, on Bella Hadid’s feet), and Nike has not released a blockbuster sneaker model since the Nike React in 2019. Part of the issue is that sneaker tastes have shifted, and Nike’s most popular models may not align with current preferences.
Jordans, the company’s most famous shoe line, are basketball shoes that became streetwear icons. But sneaker tastes, especially on TikTok, on which trends hinge, have pivoted more toward running, soccer, and hiking models. In addition to Salomons and Hokas, ’90s-style Adidas shoes, specifically the Samba and the Gazelle, are having a moment, and are currently staples in every fashion-conscious closet. (The German giant is weathering its own storm, and hopes these retro models can replace the death of the Yeezy.)
Still, a behemoth like Nike can suffer some wounds and rally back to its original strength. Hoka and Salomon may be growing faster than the juggernaut, but they are still minnows compared with Nike. Hoka, long a niche running brand and not a mainstream fashion presence, sells 440 different sneaker models, while Nike sells an estimated 10,000. Despite an ebb in its current popularity, the iconic “swoosh” brand has a multigenerational appeal and still saw a 10% increase in year-over-year revenue. But the chunky sneaker era is reverberating.
“It is not suffering from an existential crisis,” Neil Saunders, managing director at GlobalData Retail, wrote about Nike in a note to clients. “However, it isn’t on the front foot either, and has to accept that the year ahead will be one of resetting, retrenching, and reformulating the way it does business.”
And it has already started such resetting—in the past month alone, Nike announced several leadership changes, including changing executives at four of its branches. It also appointed a new president of Jordan and new CEO of Converse.
“These shifts will allow us to streamline our focus across product, brand storytelling, and marketplace, mining deep consumer insights to deliver breakthrough innovation and engagement, while building long-term growth and profitability,” Nike CEO John Donahoe said in the May SEC filing.
Nike did not respond to Coins2Day’ s request for comment.
