Nike's Rising Ambition

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If you’ve been a subscriber to this newsletter over the last year, you know that we’ve written a lot about Nike and its recent failures.

We’ve gloated about it, in fact.

A lot of the Nike’s issues had to do with a failed over-investment in D2C sales, rather than partnering with big retailers coming out of the pandemic. After poring through earnings calls and following the narrative, we predicted that the current CEO at the time would be out. We were proved right 1-2 months later.

Now, there’s a new CEO at Nike, and frankly, he’s making all the right sounds.

SIDENOTE: WE WROTE SOMETHING ON THE FOOTLOCKER DEAL. KEEP READING TO THE END.

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Nike: A New Way Forward

Elliot Hill was hired in late 2024. He was previously at Nike for like a bunch of years. It made instant sense for him to be tapped on the shoulder for this job, since a high performing company based in a place like Portland can’t really have an outside CEO and be successful at the same time.

Nike still had a disappointing earnings call this year, but it reset expectations with investors.

Hill laid out his strategy to bring Nike back to the forefront of athletics:

1. Ignite the winning culture again.

2. Storytelling is at the forefront of the brand

3. Build out a complete product portfolio*

4. Concentrating on wholesale

5. Win on the ground - support grassroots communities

There are 2 big things that come to mind here, that speak directly to the current failures we talked about last year:

Bringing sports back to the front

Items #2 and #5 make complete sense to tackle this point. This has to be in direct reference to brands like On, Hoka, Brooks, Tracksmith, and a million other brands that started eating Nike’s lunch in the running category. All these brands have great storytelling that puts athletics at the forefront on their social media channels. Nike making a heavy upfront investment in running clubs would probably be the starting move here, and then go from there to local athletics, baseball leagues, etc.

The brand has already made huge waves this year with great advertising. This can’t all be due to Elliot Hill taking the helm as commercials and ads do get planned months in advance.

They messed up the post-pandemic strategy

See above and how they failed to invest locally in the running category. This is mostly due to the fact that Nike over-invested in its own D2C channel and failed to pivot when people were coming back to stores, only to find other brands taking up all the real estate. Now they’re going to course-correct by investing back in the wholesale business again, and yes, that means we’ll see Nike product back on Amazon.

*Incredibly self aware comment here, in that Nike has realized (or known already) that ‘innovation’ is a loaded term in the face of declining sales of once-reliable flagship brands

But it looks like Nike is diving head-first back into sports and storytelling. It seems like a common sense strategy, since the company has always thrived in that intersection.

Sidenote: Dick’s Sporting Goods (DSG) is buying Footlocker

So DSG is buying Footlocker, and we don’t really know why. On the surface, it looks like DSG is making this move to increase their footprint in malls and to maybe use the real estate to test new concepts.

But maybe this has to do with Nike. Maybe this entire acquisition is to exercise leverage over Nike.

Dick’s paid a 66% premium above Footlocker’s current stock price to acquire the company. The premium is almost customary on an acquisition, but this premium…feels high. We’re not going to justify the premium, but it feels like Dick’s Sporting Goods has something that Footlocker wants.

We did some digging, and found 2 interesting things:

1. 60% of Footlocker’s inventory is Nike

2. Dick’s Footwear sales are topped by Nike

So maybe Dick’s is trying to make itself bigger to become a bigger and bigger supplier of Nike shoes hot on the heels of the company saying it plans to re-invest back into its wholesale business. Maybe the company knows that it has to compete with Amazon now that Nike will revisit the 3rd party e-commerce space.

Okay, we’re done now.