infant polo shirts but losing ground to Adidas
It was barely a year ago that Mark Parker, Nike’s chief executive, made a public pledge as big and bold as his company.
The Beaverton area juggernaut’s sales would explode, he predicted, pushing annual revenue from $30 billion to $50 billion by 2020. Having built a seemingly impregnable position atop the athletic footwear and apparel industry, few questioned that Nike could make it happen.
Today, however, $50 billion seems a long way off. Nike’s archrival Adidas has become the story of 2016. Hitting a sweet spot at the crossroads of sports and pop culture, Adidas is posting sustained double digit sales gains, particularly in the key North American market where it was dead in the water just two years ago.
Nike is still growing. Its dominant position atop the athletic footwear and apparel business remains secure. But Adidas and upstart Under Armour are growing faster. For the first time in recent memory, they’re grabbing market share from The Swoosh.
“Nike has had a terrific run, much of it at the expense of Adidas,” said Jim Duffy, an analyst with the financial services firm Stifel Financial Corp. “But Adidas has its act together again. They’re gaining share, and they’re going to gain more.”
Possibly more troubling for Nike is the sentiment that its pipeline of hot new products has run dry. Davidson. “What I hear from the critics is a lack of innovation, newness. Flyknit, (a groundbreaking footwear technology) has been around for four years. It was great. But you can’t take credit for that forever.”
Camilo Lyon, an analyst with Canaccord Genuity, echoed those sentiments, calling Nike’s new products “weak and uninspiring.”
Whether Nike’s issues represent a temporary hiccup or a more dire matter, they pose one of the toughest management challenges for Parker since he ascended to the CEO’s office a decade ago. Wall Street has noticed. Propelled by downgrades by Lyon and a handful of other analysts, Nike’s stock has declined roughly 17.5 percent since the beginning of the year. That’s more than $19 billion in lost market value.
Nike insists it’s stronger than ever. The company declined requests for interviews, but in a written statement said it will “continue to deliver growth” across its portfolio.
“We have the deepest roster of athletes, a strong leadership bench and we’re innovating across performance and sportswear, manufacturing,
digital services and at retail where we serve the consumer every day,” the company said.
“We are a growth company”: A constant refrain in Nike’s latest conference call, during which company executives stood by CEO Mark Parker’s pledge that it will reach $50 billion by 2020
“Edit and amplify”: The motto essentially means deleting the bad and improving the good. For example, the company’s golf hardware business got edited (read eliminated) in August after management determined its long term profit prospects would not up to company standards
The local angle: With an estimated 10,000 people working at or near its Beaverton campus, it is one of the metro area’s largest employers. It has launched $400 million in new construction
Going retro: The Three Stripes found new life by embracing the Originals. Last year, with help from pitchman Pharrell Williams, the company sold 15 million pairs of the Superstar in 50 colors making it the top selling sneaker in the industry, the company claims. The Stan Smith and Gazelle lines are also top sellers
High fashion: Adidas was among the first major sports brands to embrace celebrity and high fashion. Kanye West’s Yeezy line is highly coveted by sneaker collectors and difficult to obtain.
Key stat: Sales hit $14.6 billion in the first nine months of the year, up 15 percent globally and nearly double that in North America
The local angle: Adidas continues to enlarge its Portland presence. Most of the approximately 150 former Reebok employees displaced by a downsizing in Massachusetts will relocate to Portland
Kevin Plank: The company’s chief executive has lofty goals $7.5 billion in revenue by 2018, $10 billion not long afterward
Stephen Curry: The two time NBA MVP’s signature line helped the company’s footwear sales surge from $239 million in 2012 to $1 billion in 2016
Key stat: The company has chalked up sales growth of 20 percent or more for the past 26 quarters
The local angle: Under Armour is building a Portland office at the old YMCA adjacent to Duniway Park
In a business that prides itself on innovation, 2016 has been a strange year for the athletic footwear and apparel business. Shoes designed decades ago are selling in huge volumes. in October were updated versions of classic shoes introduced decades ago the Adidas Superstar, the Converse All Star Ox Low and the Nike Huarache.
NPD analyst Matt Powell said the top sellers are a reflection of a dramatic consumer shift from performance athletic gear toward more casual sportswear. “We’re in an extraordinary time for the industry, not a single performance category is trending positively,” he said. “I have never seen this happen in 16 years.”
Adidas has been a big beneficiary of the shift. The German company with North American headquarters in Portland has introduced a constant stream of updated Superstars, Stan Smiths, Gazelles and Sambas, and the public can’t get enough. Adidas sold 15 million pair of Superstars alone in 2015, making it the best selling sneaker of the year “by far,” according to former CEO Herbert Hainer.
Adidas’ Originals sales jumped nearly 50 percent in the company’s third quarter, compared with the same three months last year. That’s on top of a 47 percent increase in the third quarter of 2015.
Adidas also has jumped unapologetically into fashion and celebrity, partnering with musicians and designers. The Yeezy line developed with rapper Kanye West has proved a big success.
There was a time when purists would sneer at a sports company cutting deals with rappers and reality television stars, arguing that in the end it would damage the brand. But those days are gone.
Nike notes that it, too, has relationships with non athletes like comedian Kevin Hart and apparel designer Jun Takahashi.