Checking In on Nike’s Turnaround

Welcome to The Week Ahead, your guide to the coming week’s most important and interesting news and events. I’m BoF executive editor Brian Baskin.

The last few days will be hard to top, at least if you’re a follower of beauty news. While just a year ago we called E.l.f.’s acquisition of Rhode a blockbuster, that deal would have been the third-biggest in the sector last week, behind the proposed Estée Lauder-Puig merger and Henkel’s $1.4 billion purchase of Olaplex.

I’m sure we’ll be hearing more about some of these deals in the coming days. Subscribe to The Business of Beauty newsletter, and editor Priya Rao’s Full Coverage for more.

Back to fashion. In this week’s edition, I’ll preview Nike’s earnings, including what investors want to hear from the sportswear giant, but probably won’t.

Nike Is Losing the Expectations Game

What’s happening: Nike reports fiscal third-quarter results on Tuesday. Analysts are expecting a slight dip in sales.

No surprises: The activewear giant’s results have been coming in a bit above the consensus forecast for a while now, which you could interpret as a sign the company is savvily setting low expectations while it executes a complicated turnaround. Or less charitably, that investors are pessimistic about how that turnaround is going.

At this stage, eking out a slight increase in sales rather than a minor decline won’t matter all that much in the market, where Nike’s stock has recently revisited nine-year lows. We are months, if not weeks away from the moment when the brand will need to prove it’s found its footing — investors, not to mention consumers, are getting impatient.

Searching for the one: I’m fortunate enough to work with one of the pre-eminent Nike-ologists, Mike Sykes, who covers the brand for BoF and writes The Kicks You Wear newsletter on all things sports and sneakers twice a week (subscribe here). He diagnosed the problem last week: Nike has successfully pivoted away from its played out retro style strategy, but hasn’t clearly articulated what will replace it.

To be sure, the brand has made some smart moves under chief executive Elliott Hill, including the release of new performance running styles, the Skims collaboration and well-received, athlete-centric marketing. Some of these are already paying off.

That progress shouldn’t be minimised, given where the brand was when Hill came in. But what’s missing is the “one big thing” that instantly changes the narrative. Sykes notes it was “The Ten” with Virgil Abloh that helped pull Nike out of its last funk in 2017. It’s not clear what product or concept will play that role this time.

Bad timing: It’s not the easiest time to launch a blockbuster. Consumers may be too busy watching petrol prices shoot up to pay attention to a new shoe. There’s also far more competition in the category than there was even a few years ago, let alone in 2017.

And yet other struggling fashion giants have managed to cut through the noise – think of those videos of long lines outside Chanel stores following Matthieu Blazy’s latest show, or those viral ads that got everyone talking about Gap and American Eagle for the first time in eons.

What else is on the agenda: Nike’s read on the general state of the world is worth a listen on Tuesday as well. Activewear brands are heavily exposed to energy prices – most those innovative, moisture-wicking fabrics are derived from petroleum. Nike’s recently struck a cautiously optimistic note about its long-struggling China business, so look for an update on that. And of course there’s Converse, which needs a radical rethink, assuming Nike doesn’t sell the brand.

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