Following its stronger-than-expected Q1 results, Nike’s leadership and analysts discussed the road ahead amid inventory cleanup, challenges in China, and a renewed focus on sports.
Turnaround gains traction at Nike, though challenges persist – Reuters
Nike CEO Elliott Hill vowed to return the company to its sportswear roots when he took the helm last year in a highly anticipated change, and his efforts are bearing fruit — but a sluggish recovery in China and uncertainty over tariffs remain a drag on the company.
The company, which reported a surprise rise in quarterly revenue, has aggressively cleared out aged inventory, as well as some lifestyle product lines, to focus on more innovative shoes centered on sport.
“Nike is in the early innings of its turnaround and momentum is building,” said Jefferies analyst Randal Konik in a note.
The company said on Tuesday that its order book for spring was up year-over-year, driven by its sports category, as launches such as the Vomero, Pegasus, and P-6000 running shoes bring back customers.
Running, training, and basketball categories each reported double-digit growth in the quarter in North America, enabling a return to sales growth in the region after about a year.
“We think retailers — like the combined Foot Locker and Dick’s Sporting Goods — are reacting positively to Nike’s new running shoe lineup,” said Morningstar analyst David Swartz.
Nike’s shares were up about 3% in premarket trading on Wednesday as investors welcomed a 2% reduction in inventory.
“I am very pleased with inventory levels. Units are down more than dollars as inflation starts to come through. They have largely cleared through older franchises,” said Mari Shor, senior equities analyst at Columbia Threadneedle.
The pressure points
Progress will not be linear, Hill warned on a post-earnings call, with tariffs now expected to cost about $1.5 billion — versus the $1 billion Nike estimated previously — and weigh on margins already strained by heavy discounting to clear stock.
China remains a challenging market, with intense competition from lower-priced local brands such as Anta and Li-Ning, which further exacerbates a weaker economic recovery and a struggling wholesale business.
“We can invest to keep the marketplace clean and healthy, but it’s an expensive operating model if sell-throughs don’t improve to the levels that we need to see on a season-in, season-out basis,” said Chief Financial Officer Matthew Friend on a post-earnings call.
Customer engagement also remains weak in the company’s digital business, with revenue falling 12% in the quarter. Hill said the global digital business was still working to find solid ground, with the company paring back promotions on the channel.
Nike’s direct-to-consumer business is not expected to return to growth in fiscal 2026, executives said, as the unit recovers from steep discounts used to clear out inventory of some of its classic labels, such as the Air Force One and Air Jordans.
“I originally thought that Nike would be further along. I was looking at this fall as the real breakout point, but it’s clearly not going to happen until calendar ’26,” said Swartz.
Specialist outdoor clothing producer Dryrobe has won a trademark case against a smaller label. The win for the business, which produces waterproof towel-lined robes used by cold water swimmers, means the offending rival must now stop selling items under the D-Robe brand within a week.
Image: Dryrobe
A judge at the high court in London ruled the company was guilty of passing off its D-Robe changing robes and other goods as Dryrobe products and knew it was infringing its bigger rival’s trademark reports, The Guardian newspaper.
The company said it has rigorously defended its brand against being used generically by publications and makers of similar clothing and is expected to seek compensation from D-Robe’s owners for trademark infringement.
Dryrobe was created by the former financier Gideon Bright as an outdoor changing robe for surfers in 2010 and became the signature brand of the wild swimming craze.
Sales increased from £1.3 million in 2017 to £20.3 million in 2021 and it made profits of £8 million. However, by 2023 sales had fallen back to £18 million as the passion for outdoor sports waned and the brand faced more competition.
Bright told the newspaper the legal win was a “great result” for Dryrobe as there were “quite a lot of copycat products and [the owners] immediately try to refer to them using our brand name”.
He said the company was now expanding overseas and moving into a broader range of products, adding that sales were similar to 2023 as “a lot of competition has come in”.
On Friday, France demanded a series of measures from Shein to demonstrate that the products sold on its website comply with the law, but dropped its initial request for a total three-month suspension of the online platform, which had been based on the sale of child-like sex dolls and prohibited weapons.
Shutterstock
At a hearing before the Paris court, a lawyer representing the state said that Shein must implement controls on its website, including age verification and filtering, to ensure that minors cannot access pornographic content. The state asked the court to impose a suspension of Shein’s marketplace until Shein has provided proof to Arcom, the French communications regulator, that these controls have been implemented.
Shein deactivated its marketplace- where third-party sellers offer their products- in France on November 5, after authorities discovered illegal items for sale, but its site selling Shein-branded clothing remains accessible. The state invoked Article 6.3 of France’s Digital Economy Act, which empowers judges to order measures to prevent or halt harm caused by online content.
“We don’t claim to be here to replace the European Commission,” the state’s lawyer said. “We are not here today to regulate; we are here to prevent harm, in the face of things that are unacceptable.” At the time of writing, the hearing is still ongoing.
In a statement issued last week, the Paris public prosecutor’s office said that a three-month suspension could be deemed “disproportionate” in light of European Court of Human Rights case law if Shein could prove that it had ceased all sales of illegal products. However, the public prosecutor’s office said it “fully supported” the government’s request that Shein provide evidence of the measures taken to stop such sales.
France’s decision comes against a backdrop of heightened scrutiny of Chinese giants such as Shein and Temu under the EU’s Digital Services Act, reflecting concerns about consumer safety, the sale of illegal products, and unfair competition. In the US, Texas Attorney General Ken Paxton said on Monday that he was investigating Shein to determine whether the fast-fashion retailer had violated state law relating to unethical labour practices and the sale of dangerous consumer products.
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BasicNet’s Kappa turns back the sporting clock for its new AW25 collection, which celebrates “local heroes in football” with a community-focused campaign “honouring the places and people that inspire a lifelong love of the game”.
Image: Kappa
The campaign shines a light on local talent Tyrone Marsh in his hometown of Bedford, revisiting the streets, pitches and community spots “that shaped his football journey”.
Local photographer Simon Gill, who had pictured Marsh during many home and away games, not only “captures the Bedford Town player in the spaces that helped define his skill”, but also highlights the brand’s “rich football heritage with contemporary streetwear energy, creating visuals that pay tribute to community, culture and grassroots football”.
The journey includes Hartwell Drive, the early days of his after-school kickabouts, Hillgrounds Road, synonymous with Bedford football culture, and then onto Faraday Square, locally identified by the concrete pitches and community spirit.
To reflect that journey, the AW25 collection “offers a sense of nostalgia” with Kappa’s long-standing history in fashion and sports “seen through the Omini logo placements and 222 Banda strip”.
The campaign sees Marsh wearing Kappa styles including the Lyman and Uriah Track Tops paired with the Ulrich Track Pants in classic colourways including navy and light blue.
The wider collection includes track tops, track pants, shorts, polos, sweatshirts and T-shirts, available at select retailers across the UK including 80s Casual Classics, Terraces Menswear and RD1 Clothing.
Politics8 years ago