How Nike Ran Off Course

[Music] Hello and welcome to the debrief from the business of fashion where each week we delve into our most popular B.O.F. professional stories with the correspondence who created them. I'm Executive Editor Brian Baskin. And I'm Senior Correspondent, Sheena Butler Young. Nike is the most recognizable name in athletic footwear and apparel. The $50 billion company spent the better part of the last two decades riding high as the incumbent leader of all things sport. At the height of its gory days, Nike's bold marketing campaigns and iconic slogan "Just Do It" became the stuff business school case studies are made of. But recently, cracks in Nike's armor have become hard to ignore. A botched direct consumer rollout, the appointment of a tech focused CEO in 2019, followed by the departure of some of the marketers and merchants from the brand's gory days, have taken a noticeable toll on the swoosh. New competitors including Hoka and On are stealing attention and market share, and a resurgent adidas is posing a real threat. Meanwhile, activist investors may be circling. BOF Sports Correspondent Daniel Yao Miller has been chronicling Nike's slide and the company's efforts to write itself. Recently, he wrote about Nike's Olympics marketing campaign titled "Winning isn't for everyone" and the increasing public speculation about the future of CEO John Donahoe. Hi, Daniel. Welcome to the debrief podcast. Thank you, Sheena. It's good to be back. So, I came of age in the Nike era of Michael Jordan and Tiger Woods, the true glory days where people lined up around the block for a pair of Jordans, and you weren't cool if you didn't have a swoosh logo on your pair of sneakers. Brian, does any of this ring true to you? Do you remember those days when Nike was the hottest brand ever? And do you have a moment like that? Oh, absolutely. Just do it. I think that hit the scene when I was maybe five or six years old. It's miraculous, marvelous, supremely filled. When we's boy Nike, we know we're ready to do the cheer at crazy. And it's one of the first marketing slogans that I can remember being conscious of. And although at the time and even today it felt like so much more than that, it was an actual cultural moment. You know, Michael Jordan and Tiger Woods, like you said, over the years, I mean, really Nike meant a lot and it was just sort of part of my childhood and into my adulthood. And that's why this current moment has been so crazy to be watching just as a person and obviously as a reporter. Dan, what about you? I'm similar to you, Brian. When I was growing up in London, like those are really famous Nike campaign that was released called More Than a Londoner. And like to me, that was the essence of pure gold in terms of Nike marketing. It was like super specific, super niche understood or the kind of cultural trends coming out of London at the time, like grind music and the influence of West African culture on the London sports and culture scene. And that was really kind of like for me, the pinnacle of how well Nike understood consumers in cities that were so far away from it's like original base. Absolutely. That sort of provocative marketing was really how it made its first imprint on the athletic industry. So even five years ago, it would have been tough to imagine Nike having a rough patch as you both said, like the one we're seeing now. Dan, what's change in how big are Nike's issues? They're pretty big, but I always start off when I speak about Nike in this position by saying context is very important. And Nike remains a behemoth. It's a profitable brand with annual revenues of $51 billion is more than twice the size of its next largest competitor, Adidas. And Jordan Brown, which is just one division of Nike, sits at $7 billion in annual revenue. And like that itself is bigger than most of Nike's other sneaker competitors. Having said that all is not well. There was a tour of earnings calling June at the end of June, which saw the brand forecast a 10% sales decline in this current quarter. And then it warned of a mid single digit percentage sales decrease for their financial year and it made 2025, which has put the brand on course for its worst financial performance in over a quarter of a century. And unfortunately for Nike, the trouble is kind of happening everywhere all over the brand. Internally, the innovation pipeline that Nike was once so famous for has stalled, meaning there's a lack of new styles really on shelves and consumers have grown tired of seeing the same over supplied lines like Air Force One and Nike Dunks. They are marketing, which I spoke about before as it has kind of grown stale in recent years and lost that cultural edge and cultural now that made it so famous. And on top of that, there's significant internal reorganizations, which have been highly disruptive and repeated rounds of layoffs in the last three years that kind of shattered employee morale and removed. Decades of kind of institutional launch that used to drive Nike and make it unique. And then externally there's this rise of several challenger brands, which I'm sure we'll get onto later. And then again, Nike's old rival, Adidas, which has had a better than expected turnaround over the last year, really after the loss of its easy business. I think it's worth underscoring the rise of the challengers here as well. Because when I think back to the last time Nike was in any kind of slump and it was probably the late mid to late 1990s. And that's when Adidas and I believe Puma really came into their own internationally and certainly in the US at least. And what we're seeing right now is something similar happening with Toka and on the sneaker brands that in on's case literally didn't even exist a few years ago. Becoming real challengers to Nike, I'm not sure that would have been possible back in the 90s. And it's quite interesting to see that play out now and it speaks to Nike's vulnerability. I agree. I think it's been fascinating seeing the rise of brands like on and Hoken. And really they kind of fill in that gap that all the shortfall in innovation that has been sent Nike in recent years. Like in the time since Nike's last meaningful kind of market impacting innovation, which which a lot of people says is their flying at technology on has kind of transformed the sneaker market with its cloud technology Hoken came through with its meta rocker running silhouette, which kind of really changed the whole game in terms of running footwear and these brands are seeing astronomical growth quarter after quarter. And no one challenger brand, I would say marks a credible threat or an existential threat to Nike. And to put it into context, Nike accounts for about 17% of the overall sportswear market on its own on, for example, barely count to 1%. But it's the cumulative growth of this whole host of fast growing challenger brands, new and old. So you have the on and Hoken on one side and then older brands that are having a resurgence to like new balance and a six that are really taking significant collective market share from incumbents like Nike, but also like Puma and on the Rama. So what's happening here with innovation because I imagine Nike's R&D budget is probably twice as big five times as big as on and Hoken and half these challengers combine. And yet as you said, every time there's a new type of shoe or some material that people get excited about, it's coming from somewhere else. What is going on here? Right, I mean, like you say, Nike has no shortage of a budget when it comes to innovation R&D, but there's been a series of, I guess, botched launches or in general, like a kind of lack of new product that Nike became so famous for. But beyond those like isolated public hiccups like the launch of Devon Booker's signature shoe, which he publicly criticise and issues with the major league baseball players uniforms, which turned out to be see through the season and left not enough to the imagination. There's been several more pressing issues with their core products. So over the last 10 years, I'd say it's Nike's retro sneaker businesses really what put the brand into hyper growth mode. Styles like Jordan's, Dungeons and Air Forces have really carried the brand in the last five, 10 years. And what happened is the brand got super reliant on on these category of sneakers, which still account for the lion share of its sales today. But in the last two years or two or three years, I'd say as consumers have increasingly shifted away from these chunky retro basket ball style sneakers and have become more interested in the performance sports styles footwear that is embodied by brands like on and hooker. Nike didn't really have any new products to turn to and point this consumers towards. So for the past year or so, the brand has constantly spoken about how it's like speeding up its innovation cycle and bringing forward new styles, but we haven't really seen any evidence of that in practice as yet. Dan, you talked a lot about, or we all talked a lot about, you know, the fact that Nike is so big and putting their their issues into context. Is there a size of problem? Is there such a thing as being too omnipresent perhaps? I think that in a sense has played into it because at the same time is this increasing appreciation for performance sneakers that can also be used for casual use like the sports style trend as it's known. There's also I guess been somewhat of a fatigue to set in among amongst sneakers and sneaker consumers more broadly where is not the case that now people want their whole wardrobe to be Nike, Nike, Nike is like people are excited by the new styles. And I guess the new identities that these new sneaker brands have brought and I guess I think Nike's omnipresent certainly has played into that fatigue. And also like one of Nike's biggest missteps in recent years has been the oversupply of certain popular sneakers like the Air Force One, like the Nike Dunk and these shoes at one point not so long ago. will like gold us you can get your hands on them as soon as they hit the shelves they were gone like as soon as they were dropped on them. sneakers out, the bots would grab them before any actual individual consumers could get them. But now they're sitting on shelves for months and sometimes being discounted and you have the situation where people are simply fatigued by seeing these same styles over and over again. And I do think that has something to do with Nike's omnipresence. Although I will say, you know, I go to my daughter's elementary school, I see high schoolers walking around it is still just a wall of swooshes, particularly with boys. Like I think the brand is still omnipresent in certain ways and it has not lost its hold on the next generation. To me, it feels like the bones are still there. They're just missing a few of the particulars at the moment. But it does feel like maybe they're one great new shoe or new material away from making a comeback. Yeah, I think especially in the sneak industry, these things can change in the blink of an eye. Like you say, Brian, you saw on the rise of brands like on and hook up with with one single innovation or with one single style. You can go from being a brand that's unknown to a brand that all of some people want to wear. And I think the same thing can be true of Nike. There's still a critical mass of sneak ahead to growing up on Nike. Kids today are growing up on Nike and it still holds a very important place. Maybe the most revered place in sneaker culture. So all is definitely most definitely not lost in its market position. And the funds that has behind it in terms of R&D and innovation mean that once things are in place that I don't think it will be too long before we see a meaningful turnaround. And so if I said to say Nike is not resting on its laurels, they have attempted to shift to the vibe or there's been an attempt at a vibe shift. Nike's first big public facing go at a turnaround came during the 2024 Summer Olympics in July when it debuted the campaign winning isn't for everyone. It was provocative. It was timely. It was engaging and it was put in motion by a relatively new or not so new marketing chief. Dan, for those who haven't seen it, can you walk us through Nike's new campaign? Nike's Olympics campaigns over the years have become somewhat of an event in people's calendars. Nike and true Nike style always go big and it's the Olympics is, you know, the pinnacle of sporting and cultural greatness and that that is the time when Nike needs to show up and this this Olympics was no different and I think Nike truly sees the reins and the moment to kind of put their statement out there. But this campaign which was called winning isn't for everyone featured some of the world's greatest athletes in action and these were all Nike athletes like Lebron James, the late Kobe Bryant, Serena Williams, Shikari Richardson and many more and it was set against the monologue narrated by the actor William DeFoe. And he was asking the audience for in the minds of the athletes if they were bad people for wanting to win and and winning essentially all-custom and lacking empathy being selfish because of their desire to win. Am I a bad person? It kind of communicated the sentiment that anything less than winning, anything less than gold was essentially a failure and it really marked a bold return to the tough talking swaggering campaigns of the brand Tadeh. And there's a reason I probably did that right down who who was the visionary behind this campaign? So the campaign was kind of masterminded by Nicole Hubbard Graham who is a Nike veteran. She stepped away from the brand in January 2021 after around 17 years at Nike and she was coached back in January this year in the role of chief marketing officer and that was part of a broader shake up of Nike's marketing function which has had its own issues in recent years in terms of its ability to cut through to consumers and be as culturally relevant as it once was but Nicole Hubbard Graham also works closely with Nike genius storytellers and veterans like Enrique Cabellari who was also recently coached back to Nike's World Headquarters in Oregon from a regional role he had in Milan and as with many of Nike's commercials which have been most impactful over the years that was produced by the agency widening Kennedy. Brian, have you seen the campaign? What are your thoughts? I have. I thought it did what it needed to do. It had that old Nike swagger without feeling like a total throwback. It wasn't leaning too much on the imagery from Nike's glory days although as Dan noted it did draw on some of the athletes who are associated with that and I think it showed a potential path forward. What also was interesting to me was that Nike seems to constantly be swinging between wanting to be liked by everyone and these these sort of more I won't call this ad controversial but it's something that maybe isn't meant for everyone to stand up and applaud and unison and that was actually a question I had for you Dan is you know it seems like the reception to it was positive but there were some dissenters and that does seem a bit risky to me at a time when maybe Nike isn't universally beloved anymore and doesn't quite have that hold over consumers. Do you think that was built into this campaign that there was it was going to spark some debate? Definitely I had the chance to interview Hubbard Graham about this and she said it was not designed to be liked by everyone and like you said it is kind of a risky play at a time when Nike isn't necessarily liked by everyone as much as it has been in the past and it does plan to some very easy jokes that you've seen repeated across like social media and LinkedIn about is winning for Nike if winning isn't for everyone but it was it was interesting as well when you compared the tone of that campaign to Nike's previous Olympics campaign which which came out at time when corporate organizations were engaging a lot more in like positive social activism and it was narrated by soccer legend and activist Megan Rapinoe and it was called you can't stop us in a struck a far more inclusive and collectivist tone which was appropriate at the time as the world of sports and the world of large was grappling with the pandemic which was unprecedented but this Nike campaign I think needed to be divisive consumers I think have grown tired of brands either like sitting on the fence or or taking a more flowery tone to their marketing and and Niko Hubbard Graham told me that this this campaign was designed to make people feel something and you were designed to either like it or hate it it wasn't it wasn't meant to be nice and I think I think some of the best Nike campaigns in the past have made people feel slightly uncomfortable they've been controversial they've been on the nose and I think this is when Nike's marketing we're going to see return to from now on really although the question that the campaign did race for me is okay maybe you've inspired me but what do you want me to actually buy because as we've talked about Nike's product is a big part of the problem here and in the past with these campaigns that everyone was talking about there was sort of an obvious category where Nike was dominant or ascendant or closely associated with and I'm not sure that's the case today so I guess maybe this was planting a flag but this is just step one in a journey from what I can tell where they're going to need to follow this up with something that actually excites people when they go into a Nike store. Yeah this was this was step one and there's definitely planting a flag in in the ground and and I think Nike view this as far more than just a campaign and the way it was rolled out is far more than just a campaign is is almost meant to communicate a new brand ethos really and you can see from the way it was it wasn't just one simple video and it was followed up by every single time a Nike athlete excel that the game's one gold it was followed up by quick reactive marketing either through the athlete's social media channels and there was an incredible video that I'd recommend everyone goes to see it which was released minutes after the USA Women's Basketball team one gold that had this amazing tagline in it and are rated by all-time great Diana Tarrasi which said every four years teams come from around the world to compete for second place and that like hit the nail on the head about exactly what Nike is trying to communicate about its links to these godlike athletes but like you say Brian that the main issue is that there's not really any products that you can link to these campaigns and quarter after quarter Nike management promised people told people about the brand's famous innovation pipeline yet little has actually materialized and and I guess the biggest new launch in recent months was the MXDN which despite Nike's massive push hasn't really taken off and still relies on the air technology which actually several decades also yet we yet to see new exciting products that Nike can can kind of parlay this momentum into what I will say is what I loved about this campaign is I think it had an implicit acknowledgement on Nike's part that it had ran off course I love the quote that Hubbard Graham said in your story Dan where she said do I think Nike along with a lot of other people stopped believing that the power and magic of sport and the notion of winning could continue to grow this brand maybe I think that's powerful yeah I agree Shina I think it's reflective of when Nike's at right now where I think there was a period of time several months when Nike kind of ignored the fact that it was in the slump at least publicly on earnings course and such but on the most recent earnings call it it couldn't really hide anyone put its hands up and said we know we've oversupply certain sneaker lines we're going to be pulling back on them we know our marketing slightly run up course and and the Olympics you'll see the beginning of our turnaround and I think winning isn't for everyone is the first step on a very very long road to course correction I think when we're talking about a course correction we need to talk about about John Donahoe, Nike CEO. So many of the moves that we've discussed today, including the campaign, bringing back the executive who implemented that campaign. A lot of it could be seen as unwinding many of the moves that he made at the start of his tenure, which was in January 2020. When he arrived, there was an exodus of veteran designers, marketing experts, and other executives, followed by waves of restructuring that caused further upheaval. And he's also seen as an outsider, a tech guy, consulting type, rather than someone who lives and breathes the brand. And I think a lot of these moves are widely seen at this point as having failed, having taken Nike backwards instead of forwards. And Donahoe has made some pretty big decisions this year that essentially wiped the slate clean. And in some cases, take things back to the way Nike was being run before he arrived. Sometimes he even decades before he arrived. Dan, the other big development here is that this debate over Nike CEO, both his moves and more importantly, his future has really broken out into the open and become a matter of public speculation in a way that wasn't true even as Nike was going through its troubles in the last few years. What's going on here? Right. So to take you back to the time when John Donahoe took the job in January 2020, the sentiment back then was already not great. They didn't get off to the best start. Nike is a very insular company. And there's kind of a historic mistrust of outsiders when it comes to outsiders leading the brand. There've only been four CEOs in the company's history. And unlike Donahoe's predecessor, Parker, who began as a Nike footwear designer in the 1970s, he was both an outsider to the brand and had no background in products coming from a tech and consulting background. And the only other outsider to have led the company in the past was someone called William Perez, who was appointed CEO in 2004 and resigned in January 2006 after disagreements with the founder Phil Knight. But again, when speaking about Donahoe, I think it's important to temper things with some context. Like under him, the brand has grown in terms of annual revenue from $37 billion in 2020 to $51 billion this year. Jordan Brand has more than doubled in size in that time. But unfortunately for Donahoe, Nike is a company where investors and analysts look to and expects growth and high growth at that. And growth has completely stalled under his tenure in recent years. Thanks to the confluence of these issues that we've discussed before, like the lack of innovation, the loss of brand veterans who understood the Nike DNA, the removal of internal categories that structured the business in such a way. And also the removal of on-the-ground marketing teams in key cities around the world that helped Nike become that tacting cultural brand that it once was. He's also been hampered by issues that were put in place long before he joined, such as Nike's big shift to direct consumer sales, which was put in place of two to three years before he joined SCO. After giving an initial boost in the pandemic, that's really come to hamper Nike in terms of its go-to-market and distribution strategies. I want to talk a little bit about that direct to consumer shift because it has a bad reputation today. But it didn't start out that way initially. I remember the conversation at that time being around retailers, footlocker, the SWU even, that Nike pulling away was going to hurt them and that Nike was, in a sense, too big to fail. What was the thinking behind moving to direct to consumer and where did that sort of go awry? This was a move, it's important to say, that was applauded at that time, as brave and daring and bold and Nike wanted to have more direct relationships with its consumers and wanted to better understand them by having access to the data received from there, shopping directly with a brand rather than via third-party retailers and it was also a move to design to help Nike be more in control of his own consumer ecosystem, meaning customer experience wasn't necessarily left in the hands of third-party retailers, like a footlocker or a Dixporting Cuts. And it was a strategy that, at first, was seemingly validated by the pandemic-induced e-commerce boom when stores were closed and Nike's digital infrastructure really came through and the business received a huge boost by things like the sneakers app, which truly enlarges the funnel for Nike's online sales during the pandemic. And I guess things started to unravel in terms of this DTC strategy when sales and consumer shifted away from e-commerce as the pandemic receded and Nike's lost out by the shelf space at major retailers not being filled with as many Nike products anymore at the same time as new and exciting brands like Hoka on Began to Divert People's Attention. - That's pretty consistent with how Donahoe came to the brand. I remember that Nike was looking to position itself as a tech company, looking to rival Apple and then at the time Facebook. So he's done some things well. He's continued to grow the brand to some extent. He's also had some very public, what some might say are missteps. Dan, from where you sit, what are going to be the hallmarks of the Donahoe era? And we don't know how long this era goes on, but for now, what are the big things that stand out about how he led? - I think ultimately the Donahoe era will be remembered, especially in the Nike community by the vast restructurings and internal restructions that have occurred over several years under his tenure. Nike is very much like I said before an insular company and people in the Nike community that I've spoken to and that's current and former employees were and still are very hurt by where the brand is today. And rightly or wrongly, they believe Donahoe showed us a lot of that blame. And the replacement of Nike veterans with consultant types also hurt people within the Nike community. And we've seen recently how Donahoe has almost had to backtrack on these kind of developments by hiring back veterans like Nicole Hopper Graham or Tom Pettie, who's higher, rehire, I should say, was specifically designed to improve these relationships with retailers like Foot Locker. Beyond that, I think this era of Nike will be remembered for the time when it's core sneaker lines that had fueled this next phase of growth ran out of steam. And while still popular with a base of consumers, Nike failed to bring through sufficient innovation to carry the brand into this next phase of the sneaker industry. - I think it's so funny how the Nike fan community knows so much about what's going on inside there. I can't think of too many companies where people keep track of restructurings and which divisions report to who, and who this CMO is. It reminds me a bit of, I guess Disney's probably the closest example of another company where people just pour over every little move internally and that can have very real effects on the business. - As we wrap up today's conversation, we've covered a lot of ground. Nike's journey over the past few years shows that even the most iconic brands can face challenges when navigating change. - Dan and Brian, both of you, where do you think Nike goes from here? - I mean, the fact is, Nike have been here before. There was during the time of Yeezy's resurgence around 2015 and 2016 when the brand was facing several challenges and the threat of Adidas was very real incredible. But I mean, I think that the brand has more than sufficient financial firepower to an exit turnaround. It has key personnel back at the helm. And I think we're beginning to see the very early ingredients of a Nike turnaround, but nothing will happen without product innovation and new styles to exact consumers. One thing I found really interesting when I was doing the reporting for one of my recent Nike stories was that the brand spent $4.3 billion on what it calls demand creation last year. And that's essentially their marketing budget. And that's a budget larger than several of its largest competitors and your revenue. And it remains far and away the lead of the sneakers category, but it must, that quickly, to stop itself becoming just another sneaker brand or worse a legacy brand. And the time is certainly taking on the Donahoe era. The brand is actually hosting its first investor day in several years in November. And shareholders and analysts expect to see some positive catalyst truly take effect before then. I do think Nike is capable of the turnaround, but the pressure is very much on. - I agree. I think Nike is probably too big to fail. As you said before, they're twice as big as they're next big as competitor. And that gives them an enormous runway to try new things, to iterate on strategies to get out of this slump that they're in. That said, what we've seen so far hasn't been all that impressive. I'd say the Olympics add speaks to something. I'm not sure quite what yet. I'm not sure anyone does. But as Dan pointed out earlier, they've been promising quarter after quarter that they're gonna innovate their way out of this problem. And they've had very little to show for it. And I think people are going to start asking probably at that investor day, okay, what is the actual plan here? What are people going to be buying from Nike for the next decade, for the next two decades? And they do need to have an answer to that question at some point, even as big as they are. - Yeah, I would agree with both of you. I think this is a crisis, but it's a crisis of the Nike variety, which means it's, it's not, we're not talking about a teetering, emerging brand here, even a struggling department store. Nike is sort of still at a point where it can recoup losses and it can still get ahead of these problems. I think the fact that many of my friends cannot believe that we're doing a podcast about Nike falling off, tells them you a lot, they still see it everywhere and they still think it's a cool brand, not that I'm the focus group for that. But I do think there at a point where a turnaround is, immensely possible and they're making some really early important steps to do it. Dan, thank you so much for joining us today on the debrief podcast. Thank you for having me. Please be sure to check out Dan's articles, how Nike ran of course, and inside Nike's big marketing vibeshift at the businessofashion.com. These and other stories are available to B-O-F professional subscribers only, and you can find them in the links in the episode notes. You've been listening to the debrief produced and edited by Olivia Davies, mixed and mastered by Eric Brea. I'm Shina Butler Young, we'll be back next week with a new episode. 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