- Nike has faced increased competition recently from companies like Adidas.
- Some of its biggest brands, like Jordans, have faltered.
- The company is undergoing a “massive transformation” to be more nimble and adaptable to the current retail climate.
- Click here to see how Nike’s stock is reacting in real time.
Nike is trying to jump-start a renaissance at the company.
Recently, competition has stormed into many of Nike’s most important businesses and left the company looking flat-footed and slow in its responses. Nike is hoping that a new focus on innovation will help it fight back against this competition and regain its crown as king of the sneaker and sportswear markets.
“The company is going through a massive transformation,” CEO Matt Parker told CNBC on Wednesday. “The whole speed to market, the connection to the consumer, the direct connection we have to consumers, powered by digital and membership, is enormous. This is a massive change.”
Parker said that Nike is now focusing on selling directly to consumers, with a narrower product line and faster development cycles for new products. These changes, he said, are aimed at making Nike a more nimble and innovative company.
The company is also refining how it sells its products to customers, rethinking its e-commerce strategy by partnering with Amazon and reducing the number of retail partners from 30,000 to just 40, according to KGW.
Nike’s grip on the market comes down to a simple supply and demand formula, Josh Luber, CEO of sneaker reselling site StockX previously told Jefferies. Demand for Nike’s newest products is partially driven by their perceived scarcity, and if Nike produces too many pairs of a new shoe, demand will plummet because the product is then widely available and is no longer limited in its availability. This mostly applies to the sneaker market, but Nike losing its cool factor in one area of its business can seep into others.
A faster product development cycle will mean that Nike is able to more quickly react to changes in the demand for a product. Luber said that Nike previously has taken as long as two years to fully develop a new shoe. When a new competitor, like Adidas, comes to market with a hot new item that steals away demand from Nike, it would take Nike years to adjust its business to the new climate in some cases.
Parker told CNBC he welcomes the competition, and as a sports company, it strikes at the core of what Nike is built on.
The company’s share price jumped 2.8% on Wednesday, amid announcements of the company’s transformations during its investor day presentations.
Not all investors were impressed though, as Jefferies analyst Randal Konik said the investor day “didn’t do it” for him. Nike didn’t do enough to address the growing Adidas competition, and its declining Jordan brand of sneakers, Konik said in a note to clients on Thursday.
Nike is up another 0.73% and is trading around $US55.57 on Thursday following Parker’s remarks and the company’s investor day. Nike will report its second-quarter figures in December.
Nike is up 6.66% this year.