Nike's New Era, Lulu Hits A Traffic Jam Plus Swirling Exec And Designer Exit Rumors
Nike Hits A Fork
Today Nike celebrates the 10th anniversary of Air Max Day, an event that’s served as a platform for the brand to launch its latest Air Max technology. The day marks the debut of the Air Max Dn (Dn = dynamic), a shoe that will be launched at a total of 4,000 doors.
What was once a just-us, orgnically feel-good day when members of sneaker culture were spontaneously inspired to pull their favorite Air Max kicks out of the closet and wear them, has evolved into a global marketing event. The pressure for Air Max Dn to succeed is massive with Wall Street analysts breathing down Nike’s neck and kvetching about lack of newness in every report and earnings call.
Having been on the receiving end of a pair of Air Max Dn kicks, it’s hard not to be impressed. As down bad as Nike may be, it leaves all other shoe brands in the dust when it comes to launching a shoe. The Air Max Dn may not be the right shoe for the moment but it’s still a beautiful to behold and the power it holds as an official member of the venerated Swoosh family cannot be denied.
Nike’s Air Max 270 was an almost instantaneous hit when it launched in February 2018 but looking back it’s hard to know why. Given how far in advance shoes are designed, so much comes down to luck and hitting an intangible moment.
Whatever happens to Air Max Dn, the brand as of late Nike is very much emminating all hands on deck energy. A sense of urgency has emerged and the potential is clearly there for Nike to battle back and regain its champion title. When and if that happens is anyone’s guess but the brand clearly feels like it’s at a fork in the road.
Less Direct But With More Direction
Nike reported Q3 earnings on Thursday of last week that seemed good at first: Revenue of $11.95B scooched past expectations of $11.72B and the brand showed low-single digit growth in all regions except EMEA, where revenue was down 4%.
The stock got a nice little pop on the news and then CFO Matthew Friend revealed that revenue for the first half of FY25 would be down low-single digits, news that caused the stock to sink and earned it at least one downgrade. The stock closed at $93 on Friday, a low it hasn’t seen since October of last year.
Outside of disappointing guidance, a few things stood out on the call:
The company officially waved the white flag on DTC: “We know Nike is not performing in our potential. While our Consumer Direct Acceleration Strategy has driven growth and direct connections with consumers, it's been clear that we need to make some important adjustments,” said CEO John Donahoe.
Nike plans to bring athletes to the forefront of its marketing and it will work with wholesale partners to do that: “Our brand storytelling will leverage our athletes and sport moments to become sharper and bolder, beginning with the Olympics this summer.”
Part of Nike’s new marketing strategy includes working closer with retailers: “And we're increasing our investment in wholesale to help us elevate and grow the entire marketplace. We recognize that our wholesale partners help us scale our innovation and newness in physical stores and connect our brands in the path of the consumer.” We’ve already seen that strategy implemented with Nike pouring a lot of money into in-person Super Bowl and NBA All Star activations with JD Sports and Foot Looker.
And the announcement we’ve all been waiting for: Nike is “pulling back supply of classics, such as the Air Force 1, and…reducing supply of Pegasus ahead of launching new innovation in the Pegasus 41” (which is allegedly launching in May—have a look see here). Other than the AF1 and Pegasus, Nike didn’t mention other silhouettes but there were a lot of guesses on x.com on what will be trimmed, including Dunk, Air Max 270, and from someone whose profile lists him as ex-Nike: Dunk, Air Force 1, NikeiD and “training (lots of SKUs)”
There was also a lot of chatter from Donahoe about newness and follow up questions from analysts, but if you know me, you know I don’t obsess a lot over innovation and view it as more of a want than a need, especially at this juncture for Nike. It’s like the roof is on smoldering, deal with that before you worry about bring in new furniture.
Sour Lemons
Lululemon has had an incredible run of fairly unabated good news, so it’s worthwhile to note that the brand showed some weakeness during Q4 earnings. The quarter was fine, but management called out weaker-than-anticipated sales during Q1 to date and the stock took a serious tumble, dropping about 15% on the news. Lululemon started the year priced around $505 and it’s now sitting at about $394.
Kudos to Placer.ai, a platform that tracks traffic trends, which captured the weakness.
The Alleged Changing Of Three Guards
There’s been endless chatter about the need for leadership change at Nike, all of which has amped up this year because CEO John Donahoe is in the fifth year of his contract. Rumors have been circulating about him stepping down this year, but I want to be clear that everyone is just guessing their pants off, including me. C-suite changes at publicly traded companies is proprietary information, so only the board knows and they’re not about to casually chitchat about executive changes because it could lead to the feds breathing down their necks.
Obvious possible candidates include Heidi O'Neil, currently the president of consumer and marketplace (who spearheaded Nike’s direct strategy making her very unpopular with retailers) and ex-Jordan president Craig Williams, who is now president of geographies and marketplace. There’s been chatter Mark Parker will return, which, sorry, but that strikes me as absurd but again, who knows. I also briefly heard rumors of Deckers Outdoor Corp. CEO Dave Powers taking over, but he’s not stepping down until August, so timing seems not ideal, plus I’m told me he’s ready for a break from the West Coast and the distopian hampster wheel that is leading a prominent public company.
Jerry Lorenzo allegedly is in a contract year with Adidas, which announced it was signing him in December 2020. Adidas and Fear of God Athletics launched its first capsule earlier this year, so it hasn’t exactly been a fruitful partnership especially given Lorenzo’s multi-million-dollar salary.
Lorenzo was signed under Kasper Rørsted’s regime and current sneaker mob boss Bjørn Gulden showed himself to be unbothered about cutting ties with Beyoncé and Ye, even with both boasting very large and ardent fan bases. All that being said, I would think Adidas gives this effort a go at least through the end of the year if only because a lot of things are in the queue and Lorenzo retains a powerful following. After 2024, I think all bets are off.
WWD has reported that Alesssandro Michele may end up at Valentino, where much-loved designer Pierpaolo Piccioli was shown the door after 25 years of designing for the Rome-based label. While I don’t put much stock in designer-related rumor mongering, WWD’s industry contacts are deep and legitimate and it has a super solid track record on reporting such scoops. Indeed, the pub broke the news on Piccioli stepping down.
According to WWD, “Rachid Mohamed Rachid, CEO of Valentino parent Mayhoola, wanted Michele to become creative director of Walter Albini but the deal failed to materialize as the proposal included an investment in the project, which the designer declined.
All of this recalls WWD’s reporting on Michele back in February when it documented all the many rumors of where he was headed: Fendi, Dior, Bulgari, Givenchy, Alexander McQueen, Chanel and finally, Wallter Albini, the only name as it turns out that was actually reality based.
Valentino is a good fit for Michele, according to WWD, because he is thought to want to stay in Rome, it allows him to delve into haute couture and he plays well with label CEO Jacopo Venturini, who he worked with when he was executive vice president, merchandising and global markets at Gucci.
The one weird part is that Kering, which basically fired Michele, owns a 30% stake in Valentino. But ah well, if there’s one thing Michele knows, it’s not personal, it’s strictly business.