Commercial message: Nike shares are experiencing their biggest drop in history. They are currently trading at $33, close to their 2014 levels, representing an 80% drop from maxachieved in 2021. The crisis culminated in September of this year, when the company was removed from the prestigious S&P 500 index.
Source: xStation5
The roots of the current problems date back to 2020, when then-CEO John Donahoe launched an aggressive direct-to-consumer strategy. The goal was to cut out wholesale partners and move purchases to its own app and e-shop, which was supposed to yield significantly higher margins.
In practice, however, this model failed, and acquiring new customers became extremely expensive in the digital environment. The huge logistics costs of handling individual orders completely wiped out profits. In addition, Nike voluntarily withdrew its products from the chains to make room for competitors.
The company's management is also criticized for focusing too much on building a digital ecosystem while product development began to stagnate. Nike overly relied on recycling classic retro models and laid off a number of specialists as part of cost-cutting measures. The result is the loss of dominoesancin the footwear segment, where customers were gradually taken over by competing brands such as ŠvýcarThe On brand or the Hoka brand.
Another negative news is the decline in demand in China, which used to be the company's main growth engine. This trend was confirmed by the financial results from October 1, according to which total sales fell by 4% year-on-year, with a drop of as much as 26% in China. Shareholders were also not pleased with the very poor outlook, according to which Nike expects sales to decline in the high single digits. The overall turnaround may therefore take much longer than originally expected.
In response to the deepening crisis, the company made a change in leadership. In September 2024, Nike announced the return of company veteran Elliott Hill, who officially took over as CEO in October 2024.
In terms of performance, Nike shares have fallen 46% since the beginning of this year. However, its competitors are not doing too well either. German Adidas shares have written off 14% since January, and Swedish shares havecarThe brand On even 34%.
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