Nike has a problem with its Jordan brand that was previously 'unthinkable'

Once upon a time, Nike's Jordan brand was crushing it. It seemed that everyone wanted the brand's new releases, which sold out instantly amid overwhelming demand.

But times have apparently changed. In a note about Foot Locker, Morgan Stanley analysts wrote that Jordan's performance was "much worse than expected."

The note continues: "The risk is this is a sign Nike has the previously unthinkable 'brand problem' with its Jordan brand."

In a call with investors on August 18, Foot Locker CEO Dick Johnson said "the sell-throughs of certain Jordan models slowed considerably compared to historical rates" in North America.

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Millennials' favorite retail brands
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Millennials' favorite retail brands
24. Levi's

23. Calvin Klein

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22. Ralph Lauren

21. Michael Kors

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20. Walmart

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19. Macy's
18. Vans

17. Old Navy

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16. Converse

15. Adidas

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14. Gap

13. Under Armour

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12. Bath & Body Works

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11. Nordstrom

10. Target

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9. Urban Outfitters 
8. J.Crew
7. H&M

6. Sephora

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5. Lululemon

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4. Zara

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3. Forever 21

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2. Victoria's Secret

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1. Nike


Jordan has been struggling amid an industry-wide downturn in sales of basketball sneakers. The trends are now favoring low-top sneakers like the Adidas Superstar, as the chunkier looks of basketball shoes don't quite fit in with skinny jeans and joggers.

To remedy the issue of falling sales amid the trend shift, Nike has been releasing more and more Jordan shoes, including re-releases of vintage styles. Now, when Jordan shoes are released, they do not always sell out instantly. That has eroded the brand value of Jordan, which has long-term implications for the company, according to Josh Luber, CEO of sneaker resale platform StockX.

Morgan Stanley worries that Nike has either "misdiagnosed" Jordan's problem or "underappreciated the gravity of the situation."

A wind of change may be blowing now, however, as UBS analysts say that denim — and the basketball styles that go along with it — may be on the upswing soon.

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