Nike should use its own playbook to stage a proper comeback in sports apparel, analysts said.
The company’s sales have been slumping, with revenue down 8% in Q2 FY25 from the year prior. It’s turned to a new strategy and a new CEO to help recover and drive product innovation. One of its biggest challenges has been competition from brands like Hoka and On.
For help, it should look to its last period of challenges in 2015 to 2018, BMO analyst Simeon Siegel wrote in a February note titled “Just Do It Again.” That’s when Adidas’ Ultra Boost sneakers, which first launched in 2015, threatened Nike’s growth in North America.
Spiegel said the company used four strategies to overtake Adidas in incremental revenue dollars: upping product launches, re-elevating the Jordan brand, accelerating demand creation spending, and cleaning up inventory.
Some of those “key shifts” could boost its firepower in reclaiming its position in running now, Spiegel said.
Nike has already said that it will focus on it performance wear for athletes, particularly running. During its Q1FY25 earnings call, CFO Matthew Friend said running has been “one of our toughest fights over the past few years.” It trailed behind ASICS, Adidas, Brooks, and Hoka in running-shoe launches in 2024, according to data from BMO.
Back in 2017, Nike responded to the Adidas Ultra Boost with the Epic React, BMO analysts said. But it’ll have to be a “fast copier” again to compete with Hoka, Spiegel said in the note.
Hoka is currently driving the trend of ultra-cushioned shoes in the sport, and “although it doesn’t sound glamorous, we believe a line-up of Hoka resembling shoes may be exactly what is needed,” Spiegel wrote.
“They kind of lost their way in terms of product innovation, and I think Hoka, Brooks, and other players started taking market share,” Brian Yarbrough, an analyst at Edward Jones, said.
It looks like Spiegel’s advice to increase product launches is already in Nike’s sights, with running-shoe Vomero 18 expected on February 27. The company said the Vomero Plus, the Vomero Premium, and the new Structure model will come “later in 2025.”
If it can launch good innovative products, consumers may be “willing to trade away out of Hoka, On,” and more that have been gaining market share, Yarbrough said.
As for demand creation, Nike reported $1.1 billion in demand creation expenses to investors for Q2 FY25. It paid for a 60-second spot for Super Bowl LIX — its first ad during the event in nearly 30 years. It starred a number of female athletes, including Caitlin Clark and Sha’Carri Richardson.
The investment paid off as it topped other Super Bowl advertisers in engagement actions, a key metric in the business.
However, Nike is going to need products that are “on point with what the consumer wants” to capitalize, Yarbrough said.
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