- Revenues for NIKE, Inc. increased 10 percent to $10.3 billion, up 13 percent on a currencyneutral basis.
- Revenues for the NIKE Brand were $9.8 billion, up 12 percent on a currency-neutral basis driven by growth across wholesale and NIKE Direct; key categories including Sportswear, the Jordan Brand and Running, and continued growth across footwear and apparel.
- Revenues for Converse were $480 million, up 15 percent on a currency-neutral basis, mainly driven by double-digit growth in Asia and Europe, as well as through digital globally.
Source: https://investors.nike.com/investors/news-events-and-reports/?toggle=earnings
Right now Nike is heading into territory it hasn’t lived in before. Being number 1 has always been a result of releasing in demand product and constant innovation, but up until 2017 the growth of the company relied on Futures and wholesale. As everyone knows now Nike’s growth is via their digital efforts and their ability to drive consumers through their doors. What continues to be overlooked in dialogue are the opportunities Nike’s digital growth creates for other brands and just how this will shape the 3rd party marketplace which lives on the limb of Nike’s decisions to release limited release product. I won’t make this long since no one wants to read an essay, but I’ll deliver three quick thoughts on the 1 Billion dollar Jordan Quarter and Nike’s 10% revenue increase.
My Thoughts on Retail
Retail is completely reliant on the Nike Wall. The question has to be asked is there room enough for retail and Nike to share in this growth? I don’t think so. I expect Nike’s growth will mean that Footlocker, Finish Line and all Nike accounts will see diminishing margins. Notice I didn’t say diminishing growth? Retail has yet to place an emphasis on digital so each account holder for Nike has the ability to adjust their e-commerce strategy to offset Nike’s CDO, but this will only last for the next year as e-commerce will level off for companies like Hibbett Sports and smaller accounts. The reliance on the Nike Wall can only lead to one outcome as Nike continues to open more data driven, experiential doors. Retail will either adapt or die. I expect the acquisition of smaller chains by larger chains to happen within the next year.
3rd Party
StockX, GOAT, and Stadium Goods are the darlings of the investment world right now. Each brand is the epitome of resale. GOAT has probably the best situation as the company is a part of the Footlocker family. StockX however must diversify its product listing. In 2020 I expect StockX to ramp up their IPOs and increase the amount of alternative products being sold on the platform. Nike’s growth is not good news for 3rd party sales. This is evidence in eBay’s decision to remove sales fees for shoes above 100 dollars. eBay was disrupted by StockX and GOAT. The decision to remove seller fees above 100 is intriguing, but here is the reality:
In the post above I explained the breakdown of my sales. I talked about how in my book in 2017 my average sale on StockX was in the high 100s. In 2018 it fell to around low to mid 100s. In 2019 my average price tumbled to 87 dollars a transaction. Power sellers are being required to hold inventory longer and this isn’t a good thing. As reselling has become mainstream the average price for items has fallen and this is squeezing out a lot of resellers. As Nike continues to grow, it will become increasingly harder to sell GRs. 3rd Party will reflect this and the amount of sellers will become smaller.
Other Brands
This is a call to arms. Nike’s squeeze of retail includes the delivery of a ton of terrible product. Jordan Brand’s growth in Q2 is a direct reflection of the Air Jordan 1. The sale of that model is about to slow down and normalize as the heat around the model isn’t as strong as it has been. The host of “other” shoes that Nike requires accounts to take on are not appealing at all. Other brands have an opportunity to innovate and create compelling new product, but more important they have the chance to initiate new stories and merchandising in stores. If other brands fail to capitalize on taking the shares Nike is leaving on the table by moving product through their own doors, other brands will find themselves without enough accounts to see their own growth. My recommendation is for Other Brands to move to a small store format opened in Downtown areas that mimic boutique formats. I also recommend taking a more moderate approach to off brand pricing outlets like Ross, Marshalls and Kohls. This is not an easy strategy and requires real estate deals and hiring of new staff, but at a time when most Downtown’s across the country are offering incentives for new businesses Other Brands should be thinking small and agile to counter the giant.
These are just a few quick thoughts. I’m always open to discussion so feel free to reach out. In the meantime, you can pick up a copy of my book where I dive into a discussion on Nike and the shift to media by the company in organizing their Consumer Direct Offense:
Learn more about the sneaker industry by picking up my book: “Nike’s Consumer Direct Offense, Amazon and StockX: The Disruption of Sneaker Retail” https://amzn.to/3495DRz
