Why Nike Can’t Find Its Next Hit

0:08Sheena Butler-Young: Hello and welcome to The Debrief from the Business of Fashion where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler-Young.

0:23Sheena Butler-Young: For years, a coveted pair of Air Jordans could send sneaker fans scrambling. But when Nike brought back the black and blue Air Jordan 1 Royal earlier this month, the response was much quieter. Days after its release, the shoe was still available in several sizes, and some pairs were selling for less than retail on the resale market. That's a problem for Jordan brand, but also for Nike. At its best, Jordan has given the wider company something that goes beyond sales. Shoes people obsess over, line up for, and talk about. Now Nike is trying to turn its business around while that source of excitement is struggling too.

1:00Sheena Butler-Young: The company is cutting back on Jordan releases and putting renewed emphasis on sport with opportunities in women's basketball, running and recovery. But can those moves make Nike feel essential again? And what will it take to turn renewed interest into lasting growth? Joining me is BOF's Mike Sykes, who's been reporting on Nike's search for its next big hit. Mike, welcome back to The Debrief. Thanks for having me. Glad to be back. Okay, so Mike, let's start with the Royal Jordan release. I want you to take us back maybe five years ago, maybe a decade ago, you tell me, but what would a reaction to that sneaker have been in yesteryear?

1:37Well, funny enough, the Royal Jordan one actually did release a decade ago in 2017. There was a previous version of the shoe that came out. And I will say, like, it wasn't the craziest excitement, but there were a lot of people who were who were hyped for that shoe way more than I would say this go around. So there is a very obvious downswing that has happened with the most popular Jordan silhouettes, these retro Jordans that usually work. And I think this shoe is kind of the living embodiment of that. Mm hmm.

2:12Sheena Butler-Young: So that shoe, maybe also if I'm hearing you correctly, not the best example, because it didn't it wasn't the most coveted when it first came out a decade ago. But broadly speaking, most of the releases that Jordan has been making recently kind of landing with more of a thud than it would have a decade ago. Well, no, I would say this shoe is actually a great example. And shout out to our colleague, Leigh Takenashi, who actually pointed this out to me that like this go around, even though I wouldn't say that the the Royal Jordan one is a classic Jordan sneaker. Like there's just so much lore around this shoe that like whenever it comes out, people are just generally very excited about it.

2:54Even if it's not, you know, the hype beastiest of hype beasts, there are purists who love this shoe and will go after it no matter what. It usually just sells through. And this time around, it just didn't. So I would say that this is actually a really great example of that. Got it.

3:11Sheena Butler-Young: So this is in some ways a depiction of where Nike as a company, a wider company is today, right? Like what is the reception to that shoe this month tell you about what's happening at Nike? How does that tell you a story about where Nike is at as a company? I think it shows that they don't really know what it is that people want from them right now. Right. The classic retro styles that worked five years ago, 10 years ago, just don't really work right now. They're not in vogue. The style just isn't really there. And they don't really know what it is right now that they have that people will kind of gravitate towards.

3:50There are a few things here and there, right? Like you've got Nike's running business that is doing really well and that's working because of some of the ACG stuff that they've done. Some of the super shoes are really working for like those niche runners, but that's a real niche category. And then you've got the moon shoe that works, but it's just not proliferating the market too much right now. So there are some choices there. There are some, you know, potential things that could work. But nothing is really grabbing the people right now.

4:22Sheena Butler-Young: Well, there's this idea that you've written about a few times, which is that Nike is sort of over relied on that retro vault. That was a smart strategy. I remember Reebok, for example, like 10, 15 years ago, people saying that Reebok's turnaround would hinge on its ability to go back into the retro archives. A lot of people think Nike did too much of that. Is that sort of one of the big problems here? It's like over-reliance on coveted retro in the vault kind of moments. Absolutely. And this is something that Elliot Hill, the chief executive of the company, actually pointed out himself on Nike's latest earnings call.

4:58He talked about how the brand oversaturated the market with retro silhouettes, specifically with Jordans, and that the company would be pulling back on models like this Royal Jordan one. And we would see them less frequently moving forward into the future to sort of make the product more scarce and bump up that desirability level for the everyday consumer. But then the question becomes, in the meantime, what is it that Nike is going to present people with now? Like this is the strategy that has worked for them, like you said, Shina, for so long over these last few years. And if you're backing off of that, then what do you have to offer people, really?

5:38And that's kind of the big question for Nike, at least for me right now anyway.

5:43Sheena Butler-Young: No, I think I think you're right. I think that's the question a lot of people are asking. You did you did surface an example in one of your recent newsletters, Kicks You Wear, that Virgil Abloh's The Ten was one of those shiny examples of, you know, what Nike is able to accomplish when it says innovation, collaboration, newness. But it was still it's still it was that like a small limited edition kind of drop, right? Like how did a collection like that, that relatively few people could actually buy, create such a big moment for Nike? Like what worked about that? Other than Virgil Abloh, that is like the late Virgil Abloh, that is like the genius that he is or was.

6:21Well, so it kind of is a right place, right time thing, right? With Virgil, like it was it was like Off-White was kind of coming up. And like this was the brand that everybody was was kind of paying attention to. who Nike found, or I don't want to say they found Virgil, but they linked up with Virgil at the right time during a period where his brand was generating. They made this collaboration together. The collaboration featured several different silhouettes, right? Like the Jordan one is kind of the classic one that everybody thinks about when they think about the 10, but you've also got the Air Max 90, the Chuck Taylor, the Presto, just all these different silhouettes from these different time periods in Nike's history.

7:07And Virgil put his touch on them and it made the shoes special and they were limited and they were different from what people had seen. And, you know, just having that product there that, you know, had Virgil called it, I think he said it was like a 3 % change in the silhouette that just made it different enough for people to kind of see it as something new, but something old at the same time, something familiar. You know, they don't really have that right now. Like, and honestly, that's something that's hard to find. That's really lightning in a bottle, which I think is kind of the problem. Like Nike could use another version of the tin right now, but you can't just pull the tin out of thin air.

7:53Like that's something that happens over time.

7:57Sheena Butler-Young: And I want to stay on Jordan for a little bit. So Jordan Brand accounts for about 13 percent of Nike's global revenues. That's according to earnings. And I think I think you dug that out in your own reporting, too. But can you put it into perspective a little bit more like why what Jordan Brand is able to do for Nike is really critical right now? And then I also want to talk about the fact that Nike is trying to speak to a next generation also of sneaker consumers who didn't watch, dare I say it, Michael Jordan himself play. Like my heart breaks to say that out loud, but we'll get to that part.

8:29Sheena Butler-Young: But put into perspective why Nike needs Jordan to perform. Jordan brand has always been the halo for Nike in my eyes. It is the brand that has always been the cool part of the company. Not to say that Nike itself isn't cool, but Michael Jordan is Michael Jordan, or I guess maybe was. If you talk to some of the youngers out there. Gen Z and Gen Alpha. Yeah. According to them. Yeah. But like this is this was the guy who like personified what it meant to be great at a thing. Like he was he was he was the best. He had the best shoes. It was always just like really cool to see these these Jordan commercials.

9:19And you had like celebrities wearing the shoes. It just was the rising tide that that lifted all ships for for Nike. When things were down, you look to Jordan brand and it provided the company with some direction. And now that it's kind of floundering and just like kind of it feels like there's like not necessarily a concrete direction right now. You kind of wonder where Nike gets that from now. Right. Like like the the overarching company is is it is what it is like. Nike is always going to be a sports brand, a performance brand at its core with athletes at its focus. But like when it comes to that lifestyle, that cool factor, like where does that come from?

10:06And I really don't know.

10:08Sheena Butler-Young: So while they hired Greg Betty, who helped create some of those hit releases for Vans, do you think that has any opportunity to move the needle? And then particularly around, you know, speaking to Gen Z and Gen Alpha who don't see themselves in Michael Jordan the way that you and I might have as teens growing up. Like, does this have an opportunity to change the game for them? Do you think this is an exciting, interesting choice, Greg Betty? Yeah, I think I think Betty could could do some really, really cool stuff with the brand. I think as we laid out in our story, Leigh and I, like Greg Betty is the guy who has done basically all the cool shoes that people are seeing coming from Vans right now, which, you know, Vans is not in a great place right now either.

10:58That's another brand kind of focused on making a turnaround. But I think it really has generated some momentum in these different cultural spheres, the streetwear space, because Betty has created these models that were just kind of pulling from different aspects of these different cultural circles. I think about the souvenir vans that are based off of the Chanel bag or the charms vans that he pulled from different charms from traveling and things like that. These are different models that have resonated with people for one reason or another, which is kind of crazy to say for vans, because again, this is a company that is struggling.

11:45The Volcanized shoes don't really work as well right now. Just ask Converse how that's going. Like it is, it's just the magic of design, honestly. And now that this is a guy who is at Jordan Brand, who is working on their streetwear for the brand specifically, you know, I think you can already kind of see some of that magic working. Jordan Brand just released a triple pack of the 14, 15 and 16 in these all black colorways. And they came with with this merch and they released it on this new site called 232323 or something like that. And it sold out. It sold through completely. And the pieces that were coming along with the shoes were pretty good.

12:30And I think that's sort of the effect that we'll see from Betty kind of moving forward with the brand as he continues with Jordan.

12:39Sheena Butler-Young: One more thing on the Jordan before we move on to the larger Nike business. You mentioned earlier, you know, Elliot Hill acknowledging some of the overdistribution challenges on Jordan brand, maybe too much retro, pulling back on that. Nike has done that before with Jordan brand, like, you know, trying not to oversaturate, trying to create a little bit of scarcity. Do you think it works this time? It was the issue that there was too many things being released or was the issue that people didn't like what was being released? Yeah, I'm of two minds with this. I do think that the scarcity is necessary because the market is just oversaturated with a bunch of colorways of Jordans that people are not wearing and do not care about.

13:26And so I think considering that, like you do have to pull back, but scarcity is not the magic pill that will solve all the problems that Jordan Brand has. It's something that can sort of steady the ship, if you will. But I think they need to hit on the cultural touch points that they've hit on in previous cycles where the brand has struggled. like I said, the, you need another version of the 10 or, or another Travis Scott or, or just something like that, right. To, to re-energize the brand. And I think Nike is, is working on finding that right now and figuring out what exactly that looks like in this era where the celebrity endorsement doesn't necessarily work the way that it did five years ago or seven years ago or whatever, but I think the brand is slowly trying to figure that out.

14:22We'll see if they're able to actually accomplish that.

14:25Sheena Butler-Young: We'll be back with more of The Debrief right after this.

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15:07Sheena Butler-Young: Okay, so Jordan needs to create fresh demand. They need to reignite the halo that they've always been for Nike and managed supply. Across the rest of Nike, they're also, the Elliott Hill strategy is really about putting sport back at the center of everything Nike's doing. I want to start with women's basketball. You have Caitlin Clark and Asia Wilson. A lot of excitement around these, these athletes, interest in them beyond, you know, what they do on the court. What do you think it would take for their signature shoes to become something people are, you know, clamoring for or that they want to wear beyond the court.

15:45Sheena Butler-Young: And I would say, I think there is some clamoring maybe already, but like to really pop off and be, I think what Nike needs in the world of sport. Yeah, no, I do think, I do think that there is a, specifically with, with the Caitlin Clark shoe, like that shoe sold through just because like her fan base is just so crazy about her. And then And with the Asia Wilson shoe specifically, I think that one, similarly with the Asia one, like people were just like really excited to support that shoe. So you saw that sell out in a lot of colorways as well. Not so much with the Asia two, but I do still think that shoe has had an impact on the overall basketball marketplace.

16:31But I think with these shoes specifically, like basketball, performance basketball is just not in the greatest space right now when it comes to just the nature of the product. Like there's just so much technology kind of baked into these shoes at times that it just generally makes them hard to wear. But with that said, I will say like we have seen some basketball shoes that they've kind of crossed over. And I would count the Asia one as as one of those shoes that that did cross over. Like I saw that shoe a lot when it when it first came out just off the off of the court. And I think we might see something similar with with the Caitlin shoe as well.

17:12with Nike basketball on the women's side specifically. I think there is a lot of energy right now between Asia, Caitlin, you've got the Sabrina Ionescu shoe that's working really well for people. Soon you'll have a Paige Becker signature shoe. I'm guessing maybe you'll have a Juju Watkins shoe coming down the line. I think this is just a really strong area for the brand right now. And I think this is something that they can definitely build a foundation on.

17:40Sheena Butler-Young: And by the way, the Sabrina Ionesco shoes, I believe Nike has said for a while touted that it was like the number one worn shoe across the NBA and the WNBA. So like men were wearing her shoe for like a good solid few years. And I should also couch that basketball gets a lot of attention, but it's not a large category anyways. Like it's never been it's never been the revenue driving category across sportswear brands. So we can't put all the pressure on the women to bring that across the finish line. In fact, they seem like if Sabrina Ionescu's shoe sales and usage are to tell the story, women are probably doing that really well.

18:22Sheena Butler-Young: I want to talk running now. So running has been a bright spot for Nike. It's probably where, at least when I listen to the earnings calls, where I think Elliott seems to really be emphasizing. But, you know, the downside of running is that it's also very competitive right now. a lot of brands are doing well in that space. Consumers are maybe a little spoiled for choice and they have their favorites. What do you think running can do for Nike right now? And do you think they're edging anybody out there? I think running is a strong category for Nike. Like this is something that they've really focused on since Elliott Hill's return in 2024.

19:00And the numbers, the sales numbers are solid on the earners call. Elliott said that running sales specifically rose double digits which is good in the teens so like that's a sign of progress for a brand that that just hasn't seen a lot of that so i would i would categorize this as as one of the bright spots but i think like you said sheena like there is a lot of competition in the marketplace and like the perfect encapsulation of that is the london marathon where a runner wearing adidas set the record for an under two hour marathon officially anyway. And so like you get a moment like that and Nike is not able to necessarily participate in it.

19:44And I think at the top of this category where you have like the elite of elite marathon runners, like maybe the brand isn't necessarily in the best standing that it could be in. But I do think that like casually especially Nike is still one of the more recognizable brands in this space for people. Like they'll see a Nike shoe and they'll buy the Nike shoe. Like I think there's interest in the Alpha Fly model and kind of the models that are underneath it from a running standpoint. But I think that the thing that gets it that cultural impact in the running space is just like going out there and having these different moments at marathons where the brand is winning.

20:32The brand is having first place finishes. The brand is setting records. And that that takes time. And so we'll see how that goes for Nike moving forward. I guess you could say it didn't really go that well last year with the with the or I guess this year, technically with the London Marathon. But yeah, we'll see.

20:54Sheena Butler-Young: The other thing you mentioned sort of related to that running world, at least I think, is is the recovery products, the Hyper Ice and then the Nike Mind Clogs, which are not. I mean, I know I never did the marathon, Mike, but I do know the clogs. I know the clogs are not for running, but they are they are investing in this recovery space. What makes that an interesting opportunity? The Nike Mines, by the way, have seen a lot of success for Nike. I mean, it's not a sneaker, which is what they're known for, but it's probably one of their more coveted releases in the past year, would you say? And this is just my limited knowledge, but that was a good one for them.

21:30I would argue maybe it's its most coveted release, to be honest. Like the mine 001 is still so difficult for people to buy. Like you would not believe how many texts I get from people. They're like, how do I get these? How do I get this? I'm like, I don't know. Like, I have no idea. But no, I do think that recovery is a space where Nike can sort of find its way. Like it has a recovery just generally right now as a category, as people are approaching fitness and wellness a bit more seriously from a consumer standpoint that I think a lot of brands should be in on. And Nike is kind of doing its big thing right here.

22:13Like you've got the you got the mind clogs. Like you said, you got the hyper ice slides. They have the hyperized leg sleeves or whatever. Like there are just a ton of recovery products that Nike has that I think people are interested in. Now, what I will say is that these are like specialized products. So a lot of them are very expensive. Like would you buy a$250 pair of slides? Probably not, generally speaking, unless you're like a marathon runner or at least a consistent runner who runs in like different races. But like, hey, I think that every little bit counts for the space that the brand is in right now.

22:53And recovery is maybe it's not the biggest category, but I think at least it's something. So if I were Nike, I'd lean in on it.

23:01Sheena Butler-Young: So we've talked about a lot of areas of where Nike could focus or, you know, where it could get its next win. I want to sort of look ahead around what a turnaround would actually need to produce for the brand. So we've talked about the product, the cultural excitement. Even if Nike finds its next hit, what else would have to change for that attention to translate into a healthier business? And I will say, as I ask that question, I think about it in my head, and I say this every time we talk about Nike. Nike is lapping its competitor, its second best competitor across the board in most of these categories by at least a billion dollars.

23:38Sheena Butler-Young: I think it was our former colleague Dan on here and he would he would say, you know, all is not well at Nike, but like putting it into perspective, it's still, you know, light years ahead of a lot of its competitors. But what do you think it takes to translate that into maybe not, I guess, healthier fundamentals is maybe a better a better question. Yeah, I think that that's kind of it. Like first, the hard part for Nike right now is like finding the thing. Right. Like when once they find that thing, they're in a good space. But it just is hard to find, especially in this attention economy right now where the market is just so fragmented.

24:21Like it's difficult to manage. But I think whenever it finds that thing or if it finds that thing, it has to be managed properly. That was the thing that really sort of put Nike in this place that it's in right now. It was the mismanagement of key franchises and the Dunk and the Jordan one and the Air Force one. Like you saw those those style, those specific styles just oversaturate the marketplace. And then, you know, you also cut off your relationship with different retailers like like Foot Locker and Finish Line and all of these smaller mom and pops that that used to be the spaces that really made the brand in all of these different communities.

25:09across these different spaces. And once you cut those retailers off, you lose those spots in the community. And so I think maintaining those specific relationships is also very important, which is something that Elliot Hill has prioritized in his tenure there so far over these last two years. But I think doing that sort of thing right now only lays the foundation. the important thing for Nike is, again, finding whatever that next thing is, that whatever that next area that it can win in is from a cultural standpoint. That's what's really going to turn the business around. But once you find that thing, you really have to take care of it, especially in today's marketplace where attention is everywhere.

25:57Sheena Butler-Young: My last question, you could probably predict this, but is there one signal that you would look for or that you would watch that lets you know Nike is turning a corner? So I think I hear you and sort of what it needs to accomplish, but like, is there a sign in the next, I don't know, quarter that you're like, if I see that, I'll know they're about to turn a corner or they're turning a corner. I don't think it'll come in the next quarter or two. I think, I think this could be I think I think as long as the the turnaround has been already. And I know, you know, people don't want to hear this, like investors are rolling their eyes listening to me right now.

26:39But it's going to it's going to take even longer. I think this is something that is is years in the making, honestly. And, you know, the signal to me has always been the aftermarket, just seeing how how some of these these different drops are performing on the aftermarket. Like if you look for pairs of the Royal Jordan one right now on like StockX or eBay or whatever, like those shoes are basically selling for retail. And the reason why I look at the aftermarket is because it shows me how much people actually covet these shoes by looking at the premiums. That communicates to me how much somebody is willing to pay to participate in this moment, really.

27:26It's not even just a sneaker. It's the moment that the sneaker creates. And if you're willing to pay two and three times retail for that, that means that you value that brand a lot. And I don't really see people valuing the brand a lot as it is right now. So I think if we see that turnaround in the near future, I will be shocked. Honestly, I don't really see this thing. Maybe maybe this time next year. We're talking about the beginnings of of the upward swing that that everybody's been looking for. But I just think it's going to take a while. Like you've got Investor Day coming up. They're going to show people a lot of stuff.

28:05But I think they are in a space where like you can't just talk about this stuff anymore. You have to actually like like it has to happen. And I can't see that happening for a minute. Not to say that it won't, but.

28:20Sheena Butler-Young: I think that's fair. I think that we've talked about Nike being this big ship. You don't turn around a ship like that in a quarter often. And so I think that's the, and you're right there, that's probably the realistic take as well is that, yes, there's impatience. Yes, people would like to see things move in a certain direction sooner. And maybe that's fair to an extent. But also we're talking about a$50 billion company that's so segmented and so large that you're probably not going to see that ship do a lot of movement in just a few months or two years. I think I negated my own argument a little bit there in the end.

28:56Sheena Butler-Young: Mike, thank you so much for joining me. Always, always a pleasure to have you on. Of course, this was great, Sheena. Thanks for having me. Listeners, you can read Mike's newsletter, The Kicks You Wear, as well as his wider reporting on sportswear at businessoffashion.com. These and other stories are available to subscribers only, and you can find the links in the episode notes. You've been listening to The Debrief, produced and edited by Olivia Davies and Angel Nemo. I'm Sheena Butler-Young. We'll be back next week with a new episode. Thanks so much for joining us, and be sure to follow us wherever you get your podcasts.

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