One of the most sought-after sneakers ever made are the black and yellow basketball high-tops, the Wu Tang Dunks, released by Nike in 1999. Legend has it that only 36 pairs were made and given to Staten’s friends and family. Island hip hop group. But when the world’s largest sportswear maker teased a commercial release of the shoes last week, posting a photo of the kicks on Nike Sportswear’s Instagram account, some collectors freaked out.
“It’s hard not to think this is unrelated to Thursday’s disastrous earnings,” wrote Mike Sykes, author of sneakerhead newsletter The Kicks You Wear. By taking a special collector’s item and putting it on sale to the general public, he said, “I feel like Nike is just buttering us up and hoping we’ll forget how outdated things are”.
Nike is in crisis. On June 28, a day after executives issued a lackluster forecast for next year, its shares fell 20 percent in the single worst day for the squiggle since its initial public offering in 1980. Consumers dislike the brand’s classic shoes like Air Force 1s as much, Air Jordan 1s and Dunks, like before. Wall Street, disappointed with Nike shares, which have fallen 30 percent since the start of the year, is openly calling for a “regime change” in senior management.
“Having a technology executive come in to run a consumer products company and implement a change in strategy turned out to be the wrong approach,” said Jim Duffy, chief executive of Stifel. That technical manager would be John Donahoe, CEO of Nike since January 2020, who previously served as the head of eBay and ServiceNow.
During his time at the tennis giant, Donahoe oversaw two massive restructurings leading to hundreds of layoffs and the reorganization of Nike into men’s, women’s and children’s categories instead of divisions dedicated to individual sports. For the quarter that ended in May, Nike’s revenue fell 2 percent to $12.6 billion from a year earlier, while direct-to-consumer sales fell 8 percent over the same period. The company said it now expects Nike’s fiscal 2025 revenue to decline by the “mid single digits” compared to its previous forecast of incremental growth.
In a statement issued on the day Nike shares plunged, co-founder and largest shareholder Phil Knight said: “I’ve seen Nike’s plans for the future and I believe in them wholeheartedly. I am optimistic about the future of Nike and John Donahoe has my unwavering confidence and full support.”
Early in his tenure, Donahoe was seen as a breath of fresh air at Nike — embracing change and zealously addressing demographic disparities at headquarters — as well as someone who had Knight’s ear. The onset of the pandemic accelerated an existing plan to focus on higher-margin direct-to-consumer sales, particularly on Nike’s website and apps.
But as the world emerged from the Covid-19 lockdown, Nike “took a blind eye”, Duffy said.
The big black eye came this spring when the Major League Baseball season started. The Nike-supplied uniforms were see-through and the lettering appeared small and cheap, prompting complaints from players and scorn from fans on social media. In May, MLB Commissioner Rob Manfred issued a statement saying the league had “listened to our players” and worked with Nike to correct the issues, including discoloration caused by sweat and adjustments to the uniform’s lettering and colors.
One longtime employee who voluntarily left the company during Donahoe’s tenure said the MLB fiasco “would never have happened” when Nike’s internal structure concentrated teams in every sport, including baseball. Subsequent rounds of layoffs — about 1,940 jobs have been cut at Nike since 2020, according to paperwork filed with the Oregon Office of Displaced Workers — along with a reorganization from sports categories into men’s, women’s and children’s silos have disrupted focus.
Additionally, by shunting long-time wholesale partners, rival brands such as Hoka, On and New Balance have taken Nike’s market share at chains such as Foot Locker. In its semi-annual survey of teenage shoppers in April, Piper Sandler noted that Nike’s position as the top preferred shoe brand was beginning to slip, falling more than 2 percent in six months, while New Balance was the biggest gainer.
Martin Hoffmann, On’s co-CEO, told investors on a March conference call that the brand’s share of direct-to-consumer customers under 30 is now 29 percent, compared to just 24 percent in 2021. It has more than doubled revenue in that time.
Duffy, Stifel’s chief executive, said the metrics underscore not only that On is now appealing to younger consumers, but that a large segment of the broader growth of sports brands is older adults — a trend that Nike has missed.
“Traditionally, the sweet spot has been the 15 to 35 age bracket,” he said. “But a lot of older adults are now wearing sneakers to work, sneakers on the go, and taking advantage of that smart, casual look.”
Matthew Friend, Nike’s chief financial officer, said some of the company’s recent initiatives are beginning to bear fruit. Nike shoe bookings from retail partners this fall were up by “double digits” over the previous year, led by the June release of the Pegasus 41, a performance running shoe.
On the other hand, according to Sykes, author of the sneakerhead newsletter, younger consumers don’t have the same sense of attachment to some of Nike’s staples, such as its Jordan sneakers.
“It’s been decades since Jordan played basketball, and Gen Z has no connection to this guy,” he said. “You saw people wearing Air Force 1s or Dunks or Jordans on special occasions. Today you have people wearing different pairs of Asics or even Crocs”.
On a conference call with analysts, Donahoe said the company plans to “cut back” on its three biggest sneaker franchises, which include the Jordan 1. Nike and its main competitor Adidas often release and limit some bestsellers, such as the Air Forces and Superstars. in order to manage demand.
“It’s a great time in footwear, but not necessarily the best time for Nike because they’ve been so dominant for the last 20, 30 years,” Sykes said.