Nike exits the S&P 100 after 18 years and a $200B market-cap wipeout

Nike's destruction over the past 5 years was really surprised and until I read up about the whole "direct to consumer" fiasco it really helped me understand another trend I was a bit confused about.

About 2-3 years, it felt like, out of nowhere everyone was wearing Hoka and On brand sneakers. In my entire life it felt like the Nike/Adidas duopoly was unbreakable, and then it felt suddenly that Hoka was everywhere.

While Hoka probably executed extremely well, I imagine it was an incredibly lucky position Hoka found themselves in when all those retailers had to replace Nike with something. Maybe even allbirds would be in a better position today had they launched 3-4 years later.

Edit: I just looked it up and it seems both Hoka and On were founded before Allbirds. Seems allbirds imploded (~2021), just as Nike was ceding all their retail space (also around 2021). Had they had another year, maybe they wouldn't have had to pivot into an AI datacenter company.

As a trail runner it’s been weird to watch. Nike ACG has been putting out some seriously good, cutting edge equipment. Ultrafly is a great shoe, as is the Pegasus trail for road-to-trail they’ve also got some neat cooling tech that I don’t have personal experience with.

Project Oregon left a bad taste in a lot of people’s mouth. It feels like right when they recovered their image with runners they are losing mass appeal.

Last month, I bought two pairs of sneakers: one was a full leather design made in Spain, the other was a leather/cloth combination (Italian design, I'm not sure where they are made). Both are comfortable, seem to be of very good quality and look premium. The price of these two pairs together was less then one Nike pair made of synthetic materials.

This was in Novi Sad, Serbia. I don't know what's going on around the world, but if this anecdote is of any indication, Nike is simply too expensive for the (lack of) quality they have.

Sneakerbots killed it for everyone.

Priced out the demand IMO too early.

But also, people only have 2 feet.

I feel like Nike’s biggest fumble was not advertising the Invincibles more. It seemed they had some evidence the PEBAX foam could reduce injury in base mileage, which is the number one thing many/most runners spend the most time on. So why not make sure everybody knows this? It seems weird. If you have a lot of athletes who need conditioning and don’t want to get injured, why not advertise the crap out of the injury prevention shoes?

I hope this doesn't negatively affect Laika -- I very much like their films.

Yeezy Yeezy Yeezy just jumped over Jumpman

Yeezy Yeezy Yeezy I just did the numbers

If Nike ain’t have MJ they’d have nothing

Yeezy Yeezy Yeezy Yeezy just jumped over jumpman

Maybe they can come up with some push button pump gadget for inflating stocks.

The market has more confidence in Nike than Nvidia, however - the former trades at a higher forward PE.

I guess it’s easier to believe in a shoe brand turnaround than it is in an AI future.

I feel like athletic shoes have mostly become what they were always meant to be: athletic shoes - you know, for doing something athletic, not just for going to Costco or McDonalds or whatever else. Back in the 90s, athletic shoes, like Nike, were for everything; they were the default shoe style. Now people wear Crocs or flip-flops or something else, not necessarily athletic shoes. So now the market is smaller for Nike - they can make the best athletic shoes in the world, but most people aren't athletes, they just wanna slip something on their feet and go to the grocery store.

Two things really undead Nike: DTC and the simplification of their product line. But where did those ideas come from? Mckinsey [1].

Does anything good ever come out of management consulting? It just seems to be a scam whenever I hear about. It's to provide cover for CEOs where the consultants can get blamed when things inevitably go sour. Then you fire them and hire new consultants. It's only when the disaster is so massive that the CEO gets fired (as was the case here). And likewise, McKinsey (or whoever) just say the company failed to execute properly or they were already doomed so they gave them the best chance to succeed or whatever self-absolution they choose on any given day.

Producing things has been replaced with financial chicanery to boost short term profits in a way that's inevitably fatal to the company. Few developed economies actually produce anything anymore and we have China that produces 30-40% of the world's stuff at this point.

[1]: https://www.toddherman.com/leadership/how-data-drove-nike-in...

Lots of bad marketing moves by Nike - wonder which middle management genius' idea it was to put that big ass poster right on the facade of a historic building, if anyone remembers.

And their manufacturing quality has gone down the drain. Their sneakers fall apart in months while German brand sneakers still manage to retain their quality.

Maybe they should pivot to AI like AllBirds :)

Personal anecdote I treated myself last year to some Nikes (Vaporflys) because they looked suave on a friend's feet..

Did 180km of training, maybe 5 weeks worth, and the soles utterly shredded. Couldn't put my foot down level, corners of the soles completely gone.

Shoe store said that's what they're designed to do, no refund.

Cost me about $2AUD per km. But it'll cost Nike a bit more than that.

I thought Nike had a good thing going for a while, they were able to sell cheap lower end shoes but had some good brands that stayed a little higher status.

But where the hell have they been, as other athletic companies have taken off with better synthetic fabric, nike hasn't increased in quality. Their marketing is particularly weird, making some interesting choices.

All in all, it seems the company has been badly run the last ten years.

I'll just toss in 2c I've seen elsewhere: The brand got diluted like Burberry

They are welcome to make stuff that nobody wants. Weird designs, made poorly and disintegrating in months.

But then the share price drops.

ie: the market capitalisation drops.

They then have to pay more money to borrow.

Fewer investors are interested in giving them money.

The business spirals into irrelevance like Ken Olsen's Digital Equipment Corporation.

Restructuring happens

Employees lose jobs.

Restructuring happens again and again and again.

Employees lose jobs, more jobs and still more jobs.

Unpaid suppliers go bankrupt.

Finally they shut down and become an irrelevance like Nike, 777 Partners, DEC, BioXcel Therapeutics, Lycos, First Brands Group, Yahoo.

The marketing campaign they launched in April 2023 also deteriorated their brand position. It earned them woke coins, but the NPV of all those future woke coins flows was negative.