Times are tough for Nike (NYSE: NKE) shareholders. The company’s share price is down roughly 42% year to date as of this writing, and it trades off roughly 79% from its lifetime high. Over the last 10 years, the stock is down 33.5%. Meanwhile, the S&P 500‘s level has risen nearly 260%. What’s behind the footwear and apparel leader’s stock collapse?
Nike’s problems are multifaceted
The core growth bets that Nike put in place a decade ago have not panned out. While the company’s major investment in the Chinese market initially seemed to be yielding strong results, conditions have since soured. In addition to tariffs and trade-war dynamics creating headwinds and manufacturing repositioning, Chinese shoppers have shown a growing preference for domestic brands.
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Making matters worse, Nike’s big bets on direct-to-consumer (DTC) sales in the U.S. and other key markets also had unintended consequences. While DTC sales offered Nike the opportunity to cut out the middlemen and improve its margins, it turns out that the company wasn’t adequately positioned to make the move.
In response to Nike emphasizing DTC sales, retailers responded by giving more shelf and floor space to other brands. As a result, rivals competing in the company’s core categories had an easier path to growing mind share and market share. While Nike was once almost monolithically cool when it came to athletic wear, the business has clearly lost a step (or more) in that regard.
The brand strength that was long at the heart of the company’s growth strategy seemingly carries less cachet with younger generations, and Nike still has a lot of work to do when it comes to getting the business back on track for meaningful growth.
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