Retro 'Space Jam' Hit Fails to Solve Nike's Sales Woes
March 22 2017 - 2:38PM
Dow Jones News
By Sara Germano
Nike Inc. said a sneaker homage to the cult classic film "Space
Jam" was a smash hit, but the retro shoes were a rare highlight in
otherwise troubling results for the world's largest athletic
company.
In a conference call late Tuesday, Nike Brand President Trevor
Edwards said a recent rerelease of a sneaker worn by Michael Jordan
in the 1996 film was "the largest and most successful shoe launch
in the history of Nike." Nonetheless, the company's sales missed
expectations and profit margins were squeezed.
Shares of Nike fell 6.4% to $54.32 in afternoon trading
Wednesday.
For decades, Nike has built market share on the strength of its
coveted sneakers, especially those worn by Mr. Jordan. But the
business model by which those shoes are sold is changing, as the
company is moving away from its traditional role as a wholesaler
and tightens its grip on product releases.
The Space Jam 11 shoes went on sale for $220 in December at Nike
stores as well as at two major retail partners, Foot Locker Inc.
and Finish Line Inc., according to SneakerNews. Nike declined to
clarify how it quantified the Space Jam 11's success, but said the
shoe was also available on its direct-sales app, SNKRS. The company
typically releases a handful of limited-edition sneakers each
month.
Other information reported by Nike on Tuesday revealed its
business is slowing. Shipments of its products to wholesalers in
the next six months are down 4% world-wide, the first time that
metric has been negative in more than seven years, according to
Citi Research.
To combat recent inventory gluts and promotions, Nike said it
plans to more tightly control supply of its shirts and shoes in its
home market. External data show domestic consumers are pulling back
spending on sneakers; U.S. retail athletic-shoe sales fell 14% to
$1.3 billion in February, according to NPD Group.
Nike's basketball business has been challenged by Under Armour
Inc., which two years ago launched a line of sneakers endorsed by
NBA star Steph Curry, as well as a resurgent Adidas AG, which has
regained market share with its own classic sneakers.
As part of a basketball-themed "triple-double" strategy, Nike
executives on Tuesday reiterated their goal of doubling the
company's direct sales via its website and stores, a plan that
could affect how many highly-coveted retro shoes are released to
big sneaker retailers.
Some analysts pointed to what Nike didn't say on the call,
specifically the company's lack of revenue guidance for its next
fiscal year. "Management gave more limited preliminary annual
guidance than past Q3 periods, noting that that the guidance will
be appropriately cautious given the broader retail environment,"
wrote Citi analyst Kate McShane.
Write to Sara Germano at sara.germano@wsj.com
(END) Dow Jones Newswires
March 22, 2017 14:23 ET (18:23 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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