Nike losing steam amid athleisure rise
Could Nike Inc (ticker: NKE) lose its sportswear producer dominance? Its recent quarterly results beg the question.
The Rio Olympics proved a boon for the company, but it has bigger shoes to fill in order to keep investors happy. The Wall Street Journal notes a mix of lower-than-anticipated wholesale partner orders and competition from the likes of Under Armour (UA), Adidas AG and startups put the market in a tizzy about the company's future.
"We are becoming increasingly concerned that the quality of results is deteriorating, as top-line trends in key markets look shaky, gross margin pressure is persistent, and the company is reducing disclosure," Credit Suisse analysts wrote.
See millennial's favorite brands below:
A critical wrinkle in the fight for the sportswear throne is the athleisure phenomenon. The Wall Street Journal cites NPD Group data indicating the reasoning behind activewear purchases for this year (including August). It turns out that under one-third of those sales occurred with athletic activity in mind.
Nike is looking to beef up direct sales by 2020, aiming for $16 billion, which would make it less dependent on its wholesale partners. Also, the company announced Tuesday that it is altering its wholesale order reporting efforts, instead delivering future order reporting as earnings call guidance as well as in regulatory filings.
Earlier this summer, the company said it would halt its golf clubs, balls and bags production and focus on its golf shoe and sportswear expansion.
While the company has tried to appease the athleisure and more active markets, it's evident investors want to see results: Nike's stock is down 14.8 percent this year. And the only way to do that may be, as the company says, to "just do it."
Copyright 2016 U.S. News & World Report