Nike in crisis: the underside of the fall of the sportswear giant

© Unsplash.com/Deepal Tamang

Nike has just recorded a disappointing quarter, highlighting significant structural flaws within its activities. The number 1 in sportswear and sneakers is no longer as attractive as in the past, and this can be explained by several factors.

Young people less fond of Nike shoes

In the March-May period, Nike's revenue fell 2% from a year earlier, reaching $12.6 billion. Worse still, its direct-to-consumer sales fell by 8%. These results have pushed the company to revise downwards its forecasts for the 2025 fiscal year, now anticipating a drop in revenue of around 5%. Since the start of the year, Nike's share price has lost 30% of its value.

The company's bestsellers are no longer as attractive. It plans reductions in three of its biggest sneaker franchises, including the iconic Jordan 1. The reason in particular is a new generation less fond of Nike's essential shoes. Its first place in the ranking of favorite sneaker brands is starting to erode in favor of competitors like New Balance.

Beyond changing trends, it is the change in strategy carried out by the company that is being singled out. It goes to John Donahoe, CEO of Nike since 2020. Previously, he led eBay and software provider ServiceNow. “Having a tech executive come in to run a consumer products company and introduce a change in strategy turned out to be the wrong approach  ,” comments Jim Duffy, managing director of the investment bank Stifel, in the lines of Financial Times.

A detrimental reorganization

Because Donahoe had an idea in mind: reorganize Nike into men's, women's and children's categories instead of divisions dedicated to individual sports. His decision was intended to focus on direct-to-consumer sales. As a result, nearly 1,940 jobs were lost within the company in four years.

This reduction in workforce had repercussions on the quality of the brand's products. Recently, the outfits provided by Nike to professional teams in Major League Baseball, the American baseball championship, have attracted significant criticism. Transparency, imperfect lettering, questionable quality… The company was even forced to announce that it would improve the uniforms for next season.

The company also missed the boat on a well-defined consumer segment: those over 40. The sneaker has in fact established itself as an everyday shoe, which can even be worn to go to work.

While it has undoubtedly dominated the sector for almost three decades, Nike is losing speed. This does not necessarily mean that the brand will be outperformed by the competition. On the other hand, management will certainly have to think about new approaches to maintain its leading position in a highly competitive sector.

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