When a brand loses its appeal, a certain silence descends upon it. Not quite gone. Quieter, that is. You can feel it when you walk into a sporting goods store these days. On’s chunky cloud-soled runners, Hoka’s marshmallow midsoles, and the suddenly ubiquitous New Balance 9060s on the feet of teenagers who, ten years ago, would have been wearing Air Force 1s without thinking take up space on the wall that was once almost exclusively occupied by the Swoosh. Something has changed. Nike’s stock chart, which is down about 76% from its peak in November 2021, is aware of this.
Although the term “crash” isn’t quite appropriate, it’s tempting to describe this. Crashes make a lot of noise. This was more leisurely, almost ashamed. A company that reported flat revenue in its most recent quarter and is facing a 20% decline in Chinese sales going into the next one is the culmination of a long, grinding decline that started when the pandemic stimulus faded. The kind of value that previously seemed structurally impossible for Nike has been eliminated by the 30% drop this year alone. As this develops, investors seem to be quietly reevaluating what they believed to be true rather than panicking.
Whether justly or not, a large portion of the blame has been placed on John Donahoe, the eBay veteran who assumed the CEO position in January 2020 with what consultant Spurwink River founder Matt Powell refers to as “very specific ideas,” the majority of which “didn’t work.” Donahoe expedited the company’s internal shift toward direct-to-consumer sales. On a slide deck, the pitch made sense. Cut out Macy’s, DSW, and Foot Locker. Make direct sales. Maintain the margins. Take ownership of the data. It even appeared to be working for a while when everyone was cooped up inside and using stimulus money to shop online.
It wasn’t. Smaller rivals were busy creating real shoes that real runners wanted, while Nike was busy redesigning its app. Holding, a Swiss rookie with an odd-looking sole and Roger Federer’s silent support, continued to advance. Born into the world of ultramarathons, Hoka entered the mainstream with ease. Berkshire Hathaway owned Brooks, which continued to expand quietly. Customers who had previously gravitated toward the Swoosh by default began to gravitate toward whatever the Dick’s salesperson suggested as Nike filled the shelf space it had left at wholesalers.
In late 2024, Elliott Hill was brought out of retirement to fix what had gone wrong. The plan is simple, as any recovery plan must be in such dire circumstances. Restore wholesale alliances. Give up on making the website innovative. Innovate the products themselves once more. Return to athletics. Before he retired, Hill worked for Nike for more than thirty years, and analysts believe he is aware of the grassroots marketing power the company allowed to deteriorate. “Nike was always arguably one of the best grassroots marketing companies out there in their heyday,” says Sam Poser of Williams Trading.
It’s another matter entirely if they can rebuild that muscle. Last quarter, the gross margin was 40.2%, significantly lower than the 63.9% 54.9% from Lululemon, as reported. Once a cultural mainstay, Converse saw a 35% decline in sales. The management of China is deliberately shipping fewer goods in order to get rid of discounted inventory before attempting to resume growth, which is a mess. Poser provides a metaphor that has resonated with me. It takes a month for a ten-year-old to recover from a broken leg. He claims that it takes a lot longer for a forty-year-old to walk without a limp. Nike’s proverbial leg is broken in multiple places as it approaches its 62nd birthday next year.
Is it now time to make a purchase? It probably depends on how patient you are and how much you believe that such iconic brands simply take an embarrassing detour rather than actually dying. A stock that has dropped 76% can always drop another 20%, so the turnaround is real but gradual. However, it’s difficult to ignore the fact that the people who created Nike and knew it the best are now being asked to fix it. That is worth something. Perhaps not enough just yet. However, something.
