The Nike brand is going through tough times. What went wrong?

The world's largest sportswear brand, named after the ancient Greek goddess, has recently been losing ground. Losing sales, customers, and falling behind competitors, writes the BBC.

The former disruptor of established industry rules has now become part of it — and is in the midst of a transformation to remain a market leader.

Nike's latest financial results indicate that the recovery strategy implemented by company veteran Elliot Hill is working. Two years ago, he was persuaded to return from retirement to lead the company.

However, the pace of change is more like a marathon than a sprint.

The company's recovery was complicated by the loss of football star Kylian Mbappé. He terminated his 20-year relationship with the brand and switched to the rapidly growing Swiss competitor On.

The departure of the Real Madrid forward raises the question of whether Nike can remain the top brand not only for elite athletes but also for fans who idolize their heroes.

It's worth noting that Nike remains a giant, globally popular brand. But a series of mistakes has led to its market capitalization shrinking by hundreds of billions of dollars over the past five years, with its stock price plummeting by 75%.

Last month, Nike was removed from the S&P 100 stock index, which comprises the largest American blue-chip companies.

So what went wrong? And can Hill turn the situation around?

Matt Powell, an experienced analyst and consultant in sports retail, believes that Nike made "several strategic errors" whose consequences are difficult to fix.

Among these, he names cutting ties with retail chains in favor of direct-to-consumer online sales, as well as making limited-edition shoe models more accessible.

"The more accessible these sneakers became, the less interested people were in them," says Powell.

Among other mistakes Nike made itself, he names allocating funds to research and development of digital operations instead of creating new products.

"They essentially stopped innovating in products. Someone jokingly said they were trying to turn Nike into eBay."

Павялічыць

This joke was directed at John Donahoe, the former eBay CEO who was behind Nike's shift to direct-to-consumer online sales.

Donahoe's four years at Nike coincided with a sharp drop in the company's stock value.

During his leadership, sales initially surged due to pandemic restrictions that stimulated online shopping. However, over time, rising living costs forced consumers to cut spending.

As demand in key international markets, particularly in China, began to weaken, Nike announced cost cuts and employee layoffs.

The company's focus on digital sales allowed newer brands, which were quicker to pick up on trends, to gain on its heels.

On store shelves, the space previously occupied by Nike began to be taken over by brands like On and Hoka.

For a company that prided itself on its innovations and built its brand on them, this was a serious warning.

It was Nike in the mid-1980s that signed a contract with then-rookie Michael Jordan. At that time, the company was not a major player in the basketball market and was primarily known for its running shoes.

The risky move – spending its entire basketball budget on Jordan even before he played his first NBA game – made Nike what the company is today.

Nike created an entire shoe brand around him — Air Jordan. The red and black colors violated NBA rules, but Nike used this as a marketing ploy and paid the fines.

In subsequent years, Nike forged partnerships with the outstanding athletes of its generation — Tiger Woods, Serena Williams, and Cristiano Ronaldo. All of them competed with the Swoosh logo, conquering peaks in golf, tennis, and football.

Although the brand still collaborates with Jordan, who has long retired, as well as with Williams and Ronaldo, Woods ended his partnership with Nike in 2024.

"I'm not saying what they did wasn't great, but that's in the past," says Tim Dardenjer, a lecturer who researches marketing and strategy. "That's not the future or the present, and it's those that define sportswear sales today."

Nike still has many star athletes — from Rory McIlroy to Vinicius Júnior.

However, the company has now lost its biggest football star — Mbappé, who had partnered with Nike for nine years, as well as World Cup winner Lamine Yamal.

Yamal hinted that switching to Adidas would give him a chance to stand out among Nike's many stars, while Mbappé stated that at On he would be "surrounded by innovators who dream of the same things I do."

Was this a kind of farewell exit from Nike?

Dardenjer believes that Mbappé's move is reminiscent of Jordan's decision decades ago to choose Nike over Converse and Adidas because Nike gave the athlete the opportunity to become inextricably linked with one brand.

"Athletes have egos, and they want to be part of something big, to feel that they are helping these changes and growth happen."

Nike CEO Hill stated that over two decades of collaboration with Mbappé, the brand had "many great moments."

"We wish him success in his new phase," he said during a conference on Nike's financial results, adding that the brand still has "a strong roster of athletes."

Lost ground, but not out of the game

Despite all this "pessimism," Nike will remain number one, Powell believes. Millions of people worldwide, including young people, remain loyal to the brand, although its mistakes have shaken the company's dominance.

"Will Nike be the same giant it once was? I don't think so. Can the brand return to growth and profitability? Yes," says Powell.

"When you stop innovating, it's not enough to simply restart them for them to immediately return to full speed," he adds.

Powell believes that Nike's recovery plan, called Sport Offense, will start showing positive results next year.

Hill stated that Nike still has "a lot of work to do" on its sportswear line, the Jordan brand, and in the Chinese market. He said this after the company announced quarterly revenues of $11 billion, which were below analysts' expectations.

Notably, the company cited the situation in China as one of the "negative factors": revenue there decreased by 26%.

Sales of the Jordan brand have also decreased worldwide. Hill stated that the company "oversaturated the market" with iconic retro shoe models and will now reduce the volume and frequency of product releases for this brand.

Nike stated that it expects revenue to decline by "high single-digit percentages" in the next fiscal year. The company also plans to save $2.5 billion by 2031, partly through job cuts.

Nike CFO Dave Denton stated: "Our results are below both our expectations and our potential, and we are focused on closing that gap."

Following the announcement of the financial results, the company's shares fell more than 8% during trading in New York after the close of the main session.

Last year, the brand launched a campaign based on its iconic slogan Just Do It. Now, the call aimed at the younger generation is "Why Do It?".

Youth and future sports stars might ask themselves: why Nike?

• 2
• 1
• 4
• 3
• 1
• 0
• 0
• 0