History has a way of coming full circle. On February 7th, 2025, Nike's stock price whispered a tale of déjà vu, revisiting the price level it hadn't seen since December 2015.
Nike has always held a special place in my heart. I began my consulting career working on Sports Retail projects, and devoted nearly a third of my consulting journey to this industry before pursuing my MBA. I've lost count of how many times we've presented Nike as a "best-in-class" case study to our clients. In fact, Nike was featured in the opening line of my application essay to Columbia Business School…
After spending considerable time studying this industry, it occurs to me that all the business strategies we passionately discussed, whether successes or failures, were merely business cycles.
The sports industry is particularly fascinating due to its unique dynamics: an 18-month product development cycle on the supply side overlapping with evolving consumer aesthetic preferences on the demand side. This creates a distinctive cycle in the sports industry - roughly three years of expansion followed by two years of contraction. At market peaks, brands are crowned kings; at market bottoms, they become everyone's punching bags.
Even Nike can't escape this pattern. In fact, this isn't Nike's first time facing such challenges.
At the end of 2015, Nike's business and stock performance soared, driven by the rising global middle class and increasing awareness of sports and personal wellbeing. However, 2016-2018 brought a shift as Sports Casual became the dominant trend, and adidas capitalized on this with its Originals and Yeezy lines, aggressively capturing market share from Nike. Nike's stock price suffered for two full years.
In 2017, after maintaining a low profile for almost two years, Nike announced its ambitious transformation strategy - Triple Double (2x Innovation, 2x Speed, 2x Direct). Shortly after, Nike's stock price began to rebound, ushering in a new era of dominance. In the following years, professional athletic brands regained popularity, distribution channels were revolutionized by digitization, and luxury brands competed to collaborate with Nike. Even COVID-19 couldn't halt this momentum. At the cycle's peak in 2021, a Nike x Dior collaboration sneaker sold for nearly $50,000. Nike had reclaimed its crown jewel status.
Then the tide turned again. Starting in 2022, boutique brands like Lululemon, On, and Arc'teryx quickly gained market traction. Consumers began losing interest in Nike, and the company once again fell from its throne. Despite a brief recovery in 2023, it never fully rebounded and faced deeper challenges in 2024. The December earnings report not only showed worse-than-expected results but also projected even weaker performance for the next two quarters. Even the return of Nike veteran Elliot as CEO couldn't restore market confidence. While wholesalers continue clearing inventory at steep discounts and consumers abandon their once-favorite brand, Nike appears to be approaching a critical juncture. But is this really the end of the story?