Specialist
Former director at Nike Inc
Agenda
- Nike’s (NYSE: NKE) merchandising and inventory management strategy, plus update on current excess inventory liquidation progress
- Categorical performance trends between apparel and footwear
- Channel mix and strategic considerations in the near vs long term for D2C and wholesale distribution
- Medium-to-long-term outlook
Questions
1.
What are your thoughts on the current demand environment for athletic apparel and footwear, given inflationary pressures, recessionary fears and the inventory dynamics over the past couple of years?
2.
How should we think about comps for 2022 vs 2023, particularly Nike’s progress thus far on managing inventory relative to what we saw from supply headwinds?
3.
When you alluded to Nike’s innovation pipeline drying up, what exactly did you mean? Could you substantiate what we’re seeing right now?
4.
Which players have been the biggest market share gainers, especially in North America’s strong demand environment for athletic footwear that has outperformed the consumer discretionary sector? You mentioned emerging players such as Hoka, Saucony and Salomon.
5.
Nike has struggled with the women’s segment and authentic brand messaging, being the large multi-national business that it is. What’s the company’s approach? It has launched micro stores, specifically utilising data to curate inventory and make merchandising relevant to particular areas. Could you substantiate further on that, or what its multi-deal approach should be going forwards?
6.
Considering Nike’s fear of market share bleed, especially with the void of Adidas, one dynamic to think about is the emphasis on D2C and how wholesale has re-emerged as a well-performing and highly relevant channel. Could you discuss the company’s relationship with wholesale? Do you think leadership has had to reconsider its approach to D2C in the past 6-10 months or so?
7.
How should we think about Nike’s lost shelf space in terms of category-specific speciality running, especially around the impressions and stickiness of the market share capture that Hoka, Salomon and others have seen? Will it be particularly difficult for Nike to reclaim its place within certain wholesale segments?
8.
In terms of the outperformance of the athletic footwear sector, what do you think that is primarily attributable to? Are we seeing a demand rebound in pent-up demand dynamic playing out? Was that the case in the past couple of months due to inventory shortfalls during supply-side shocks in 2022? Alternatively, is this something more fundamental to the market and with consumers still willing to index on high-ticket, high-priced speciality running categories?
9.
In terms of Nike’s view around warmer weather seasons, how have historical comps typically performed for the company during this time period, with consideration to what is special and unique to the demand environment we’ve already discussed? How would that come into play and what would be the net effect on the brand’s momentum?
10.
What are your thoughts on Nike’s reliance and ongoing push towards heavy discounting as it tries to work through the inventory bloat? Fiscal year gross margin is expected to decline by about 2.5pp. Could you discuss the mechanisms of how the company could discount more strategically or intelligently vs the general athletic footwear market? If we think about the specific areas where inventory bloat might be most concentrated, how can discounting be applied nichely across different categories?
11.
What is your 6-12-month outlook for Nike’s top line performance and margin contribution relative to 2022?
12.
What are your thoughts on the specific areas of investment Nike is making in terms of CAPEX? The company’s targeted two-day-free-delivery window to compete directly with Amazon generated a fair amount of attention. What is your impression of its ability to execute D2C and position itself more towards Amazon, especially given the data infrastructure and library it has?
13.
How are you thinking about risk factors inherent to today’s demand environment and consumer behaviour? What is the risk of potential in-store traffic slowdowns, lower spending and consumers further trading down? How are you assessing the reality of a hard line recession and the hawkishness of the Fed to continue pushing interest rates, as it seems pricing and wage growth still is particularly strong?
14.
What’s your take on the sentiments surrounding a full-scale China reopening? Nike is reportedly already seeing some material benefit. What would be your immediate thoughts and impressions about what we can realistically expect for top-line contribution and overall recovery over 2023?
15.
What do you think of Nike’s go-to-market strategy when it comes to maintaining brand heat and relevance? You highlighted recent collaborations and how well the company executed on these, noting Tiffany & Co and collaborations with mainstream artists and musicians such as Drake.
16.
What importance do you give to the dynamics of the retail market for Nike, especially considering topics such as brand heat and understanding developments within product mix?
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