Nike shows signs of weakness amid 'drastic' strategy shifts: Analyst

By Retail FOXBusiness

(Associated Press)

Nike’s recent “drastic” strategy shifts amid intense competition in the sports apparel industry are signs that “the bloom is coming off the rose” for the venerable brand, according to a Canaccord Genuity research note released this week.

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“While there aren't many times in recent memory in which [Nike] has been on a share-losing path (the last is 2009-2011), we believe the combination of a more formidable competitor in Adidas coupled with a sharp deceleration in North America is leading [Nike] to make drastic and necessary changes to the way it goes to market, as evidenced by last week's reorganization and its decision to begin selling on [Amazon],” Canaccord analyst Camilo Lyon said.

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As competitors like Adidas and Under Armour chip away at Nike’s one-time stranglehold on the North American marketplace, the Oregon-based company reversed course this week by agreeing to sell some products through Amazon.com’s e-commerce engine. That decision comes days after Nike said it would lay off 2% of its workforce amid a global management restructure.

While still the dominant force in the apparel industry, Nike has lost ground to a resurgent Adidas brand in recent quarters. Adidas reported a 30% increase in revenue in North America for its most recent fiscal quarter, far outstripping Nike’s recent efforts on its home turf.

With store traffic to brick-and-mortar retail partners like Foot Locker on the decline, Nike is increasingly turning to e-commerce and digital efforts to drive revenue. The company said a global restructure of its internal management will allow for increased collaboration on direct-to-consumer sales, product innovation, and renewed focus on key sales markets around the world.

Lyon argues that the restructure “[seems] to mimic steps Adidas has already made,” suggesting that Nike is being reactive in response to surging competitors.

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“Nike’s reorganization of its business reporting units coupled with a 2% workforce reduction suggests to us that it is taking dramatic steps to reinvigorate its business, changes that appear to be coming from a defensive posture, not an offensive one,” Lyon said.

Canaccord reduced its estimates for Nike’s 2018 fiscal year, due in part to expected deacceleration of Nike’s North American business.

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