Tomorrow is one of the most important days since the 2016 transition from Phil Knight as the leader of Nike. It’s important because the brand took the position of the bold athlete and made a goal of 50 billion a year by 2020. As bold as this statement was it was in contrast to a company like Amazon that undersells everything. Investors hear 50 Billion and in their heads and wallets they expect it to happen when a company has a trajectory like this:
The problem is at 25 billion in 2013 four years later the company added 9 billion. The logical progression would be that the company could continue to grow at 2-3 billion a year which would place Nike right at 44 billion. The 50 billion dollar number in my opinion is like the sub 2 hour marathon. It’s a number that could be attainable in the perfect world, but the world is imperfect especially when it comes to fashion. More important, when a company chooses to shift the delivery system for its product there is going to be a learning curve. While Nike began shifting to DTC in 2012, they really didn’t complete the transition until this year when they announced the name of the move as Consumer Direct Offensive.
It was never realistic for the brand to aim at a target of 50 billion, but why not put the number out there as a goal? Is the failure to hit the target a reason to panic?
Those looking at tomorrow’s Investor Day as an opportunity for Nike to change their projections as a failure, are for lack of a better word, stupid. We are looking at a brand that is gaining a direct pipeline to their customer. Their margins are being affected by the promotional environment, but when you look at DTC over the next few years, investors should be excited by the potential for growth. There is a lot to be repaired by the brand in inventory and promo, but the fact that Nike lost retail market share, but still remained flat has to be given serious consideration.
I’m not an analyst, but I think there is reason to look at the positives although the market has certainly shifted from athletic performance footwear to casual footwear, more people than ever are changing their lifestyles and incorporating fitness into their daily routines. Nike is perfectly positioned to capitalize on performance making a return. It should be interesting. If you aren’t busy you can sign up for the livestream at the source link above.