Nike’s business is exploding.
The company’s e-commerce, women’s, and North American businesses are thriving as the company invests in new designs and technology.
But like any retailer, Nike faces a few obstacles, according to a recent report by Morgan Stanley.
Here are Nike’s biggest threats.
1. Athletic wear goes out of fashion.
While the popularity of yoga pants and sneakers is often cited as a fashion trend, Morgan Stanley analysts believe that shoppers are hooked on casual comfort.
Women in their 20s and 30s are largely driving the “athleisure trend,” in which customers buy leggings with the intent of wearing them to the gym, errands, and brunch.
The analysts believe that shoppers will continue to choose this kind of apparel over denim.
But if consumers start shifting toward a more formal look again, Nike’s sales could slow down.
Given how fickle shoppers are, this threat is something for Nike to consider.
2. Under Armour keeps growing
Under Armour is the second-largest US sportswear company behind Nike, with more than $US3 billion in revenue last year.
The brand still has only a fraction of Nike’s $US28 billion in annual revenue.
But Under Armour’s sneaker with spokesman Stephen Curry is selling out, proving it has real potential as a sneaker brand.
Before Stephen Curry was Under Armour’s biggest star, he was rejected by Nike.
Nike passed over the basketball star twice, Darren Rovell at ESPN reports.
If Under Armour keeps making savvy moves like the Curry partnership, it could experience explosive growth and put a dent in Nike’s business.
3. China disappoints
The rising middle class in regions like China are increasingly demanding athletic apparel.
These largely untapped markets could provide big opportunities for companies like Nike.
“As the GDP per capita rises the consumer has more discretionary income to spend and we broadly see sport participation rising,” the analysts write.
But Chinese consumers can be unpredictable, which could lead to problems for Nike.
For instance, luxury brands who moved into China several years ago are now struggling as shoppers choose fast fashion retailers like Zara instead.
China is a big growth opportunity for Nike, but the market is highly unstable.
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