By Inti Pacheco
During one of the busiest shopping weekends of the year, Nike was the only brand to have a 30% discount on most of its footwear at Macy's famous Herald Square location in New York City.
Nike is in a race for cash. Chief Executive Elliott Hill said after he took over in October that his top priority was clearing out the company's inventory. The company is slashing prices on its website so aggressively that it is not only risking its own holiday sales but also weighing on its retail partners.
The sneaker giant will deliver quarterly results Thursday for the quarter ended Nov. 30, and it is expected to report its third consecutive sales decline -- a 9% fall from a year earlier, according to analysts polled by FactSet. Hill, a Nike veteran who returned to lead a comeback, is expected to lay out his strategy after a year of bad results.
The discount-driven cleanup has already made a dent on the results of some of Nike's large partners. A pair of Dunk sneakers sells for $115 at Dick's Sporting Goods or Foot Locker but shoppers can get the same shoes for $85 on Nike's website.
"It impacts perception of the product by the consumer, it impacts negatively the brand," JD Sports CEO Régis Schultz said in November about Nike's discounts.
Nike is now selling more to retailers such as Foot Locker and Macy's than it did a couple of years ago. It is also rekindling relationships with retailers such as DSW that it cut ties with in 2022 under former CEO John Donahoe to focus on selling items directly to consumers. The strategy yielded record profits at first, but early last year, executives realized they were stuck with too much merchandise and needed help unloading it.
Academy Sports & Outdoors CEO Steve Lawrence said last week that the retailer would get a wider assortment of Nike products to about 140 locations, or about half of Academy's stores.
It will be the most meaningful launch in the company's 86-year history, he said. The sporting-goods chain has posted declining sales since April 2022.
Nike still dwarfs its sneaker competitors, and its products are prized by retailers. Executives from Foot Locker, JD Sports and Macy's have voiced support for Hill's strategy, saying their businesses will benefit from selling more Nike merchandise in the long run.
"Elliott and his team, I think, are absolutely taking the right actions for the brand in the overall marketplace," Foot Locker CEO Mary Dillon said earlier this month. The chain posted weak quarterly sales and lowered its finance targets in its October earnings report, citing softness in Nike's business. Nike's discounts were higher than the retailer anticipated, but Dillon said she expects their intensity to abate.
Hill's return was received with optimism on Nike's campus, and he has done more than slash prices. In his first two months on the job, Hill cut tech spending, secured an extension for supplying uniforms for the National Football League and shuffled executives in marketing and operations.
Hill put the company's top lawyer in charge of Nike's sports-marketing division, one of the company's top jobs. He also appointed a new head of human resources.
In November, Nike resurfaced as a major sponsor for the industry trade show The Running Event, where it barely had a presence in recent years. Nike executives showed up with marathon world-record holder Kelvin Kiptum to unveil the latest iteration of its super shoe, the Alphafly 3.
The sports giant is catching up in the running category because it underinvested in local communities in recent years. Other brands such as Brooks and Hoka captured runners in Nike's absence.
Hill's is dealing with the hangover of a period of low morale stemming from several rounds of restructurings. Internal surveys recently showed that many employees at the company's Beaverton, Ore., headquarters were uncertain about the future of Nike, Hill said in October.
Investors say the moves are steps in the right direction -- even if they were mostly laid out by Hill's predecessor earlier this year. The part of the plan that can't come fast enough is a new shoe that can capture the public like the Nike Dunk, a revival of 1985 classic sneaker that became a multibillion-dollar franchise in recent years.
Nike executives reduced supply of its Dunk, Air Jordan 1 and Air Force 1 franchises to protect their public perception, but the company is still making more of these shoes than it can sell. More than half of Nike's men's footwear was being sold at a discount on the company's website as of Wednesday.
New tariffs could also complicate Nike's recovery plans. It makes most of its footwear in Asia. The company would face higher costs if President-elect Donald Trump follows through on plans to add new tariffs on most imports into the U.S.
In Europe, Nike last year disclosed that it was appealing customs claims by European and Belgian authorities. The company said that losing the dispute would have a material adverse impact on its financial position. A trial is scheduled for February 2026.
Write to Inti Pacheco at inti.pacheco@wsj.com
(END) Dow Jones Newswires
December 19, 2024 05:30 ET (10:30 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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