Nike, the longtime star of the apparel industry, is facing some speed bumps.
The retailer just announced sales of its basketball shoes were down 1% from a year earlier, despite soaring in previous years.
Inventories have also risen. Shares of Nike fell as much as 6% after the market close.
The weak earnings results are another blow to Nike. A recent story in The Wall Street Journal pointed out some of the company’s issues.
Here are the biggest problems Nike needs to overcome.
1. The apparel industry is struggling
Mallory Schlossberg/Business Insider
Nike has long been viewed as immune to the struggles of the apparel industry, but the sector s still ailing and consumers for the most part don’t want to spend money on apparel.
Stores that sell Nike merchandise have been faltering, too, such as Sports Authority, which filed for bankruptcy earlier this year. And Macy’s sells Nike, and though the Nike section remains one of Macy’s Herald Square’s only pristine sections, Macy’s is still struggling to drive traffic to its stores. (And The Journal points out that Nike’s push for online sales has hurt smaller businesses that sell the brand.)
A recently Morgan Stanley report predicts that apparel and footwear sales will grow 1-3% over the next three months, but the report showed that year-over-year growth on a 3-month average for clothing and accessory stores were down -5%. The sporting goods, hobby, book, and music store category was up 4.9%.
2. Women’s athleisure is getting more crowded by the day.
There are the major competitors — like Lululemon and Under Armour — and then there are more niche brands, like the ultra-luxe Sweaty Betty and Bandier, and Outdoor Voices, pictured above, which prides itself on branding that focuses on fun, rather than being competitive and the best. In other words, its the anti-Nike, and that could be appealing to girls who sought an alternative to Nike’s “just do it” mentality.
Though in sheer size none of these brands — even the rapidly growing Under Amour — have nothing on Nike, The Journal points to an NPD study that says there are over 700 athleisure options for women to wear these days. Put all of these smaller brands together, and you could have an actually viable threat to Nike’s market share.
3. The most popular product might be going out of style.
The Journal highlights how Foot Locker, and a recent UBS note seconds this notion, highlighting how investors are concerned for how basketball trends are slowing down. This is especially a concern since basketball apparel accounts for 12-14% of Nike’s business. In good news, though, UBS says that the trend for Air Jordan sneakers are still “strong.”
But stylish sneakers are now in, and that has helped Skechers emerge as a major player in the athletic footwear category.
Nike announces earnings for fiscal 2016 on Tuesday.
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