Last week Nike beat Wall Street's profit forecast… then watched its stock fall about 10% before the market even opened.
For those counting - that’s now a 78% decline over 5 years…
And today I’m here to challenge that the only problem Nike had was that they “went woke”
Because if that were true the company would have shown at least some signs of life in the past 5 years…
And the real problem is more subtle than some culture war headlines…
Nike’s biggest asset between 1990 and 2020 was relevance…
They had all the best athletes… from Jordan to Ronaldo (the real one)
And their shoes were forefront in every retail establishment… if it sold shoes it sold Nikes.
Which meant that Nike was the holy grail of footwear for at least 2 generations…
But then management made not 1 but 2 MASSIVE errors…
First they decided to stop focusing on retail… and focus more on direct sales…
Which in theory made sense because the margins are better…
But what Nike overlooked was that their departure creates a vacuum in the stores… space that gets filled by other brands…
Which explains why you’re now seeing On and Hoka shoes everywhere…
And second… they got cheap on athlete endorsements…
They whiffed on Steph Curry who went to Under Armour…
Then they told Roger Federer he was too old and he went to Uniqlo…
And they STILL didn’t learn their lesson, because just last week they got outbid by On for Kylian Mbappe (arguably the best footballer on the planet)
So even though the stock is down 78%… I’m not ready to call a turnaround story yet…
Because as long as their cultural relevance keeps decreasing… and they keep losing star athletes to other brands… the comeback ain’t started.
And I’ve seen far too many smart investors throw money at this tanking stock over the past 5 years… just because it’s a big name…
This ain’t a Hollywood restaurant though… and simply being a big name isn’t enough to force a turnaround.
So until Nike starts signing big names again… I’m out on this one…
Oliver