Why is Nike’s financial recovery moving so slowly?

Nike has shown limited signs of recovery in its latest financial results, but it is still struggling to win over investors. Shares in the world’s biggest sportswear brand have fallen 75% over the past five years, wiping hundreds of billions of dollars off the company’s market value in the process.

Although Elliott Hill, who has returned to lead the company, has begun laying out a recovery plan, the pace remains sluggish. Nike reported quarterly revenue of $11 billion, below analyst expectations, and said it expects revenue to decline by a high-single-digit percentage in the next fiscal year.

Key market takeaways

  • Shares have fallen 75% over the past five years.
  • Quarterly revenue of $11 billion came in below expectations.
  • The company plans to save $2.5 billion by 2031.

Nike also said it aims to save $2.5 billion by 2031, with part of the program involving job cuts. The company’s removal from the S&P 100 index last month also signaled growing pressure on the brand in U.S. markets.

What strategic mistakes are analysts pointing to?

Industry experts say the core problem was weakening ties with retail partners and shifting sales heavily toward the company’s own digital channels. Opening up products that had been positioned as limited releases also reduced their appeal.

Another criticism centers on research and development spending being directed more toward digital operations than new products. While online sales supported growth during the pandemic, weaker consumer demand after that — along with high living costs and soft demand in key markets such as China — pushed Nike toward cost cuts and layoffs, while shelf space was taken over by rising brands such as On and Hoka.

How are sponsorship losses affecting brand power?

Pressure on the brand’s image is also being felt in athlete sponsorships. Football star Kylian Mbappé leaving Nike for Swiss-based On and Lamine Yamal choosing Adidas highlighted how young stars are increasingly seeking a stronger identity with a single brand.

Nike still retains ties with major names including Michael Jordan, Serena Williams, Cristiano Ronaldo, Rory McIlroy and Vinicius Junior. Even so, analysts say the impact of Hill’s Sport Offense plan will take time, though the company still has a chance to return to a growth and profitability track.