For Nike, Is the Worst Over?

This is the final Week Ahead newsletter of 2022. We will resume publishing in January.

When France plays Argentina in the World Cup final on Sunday, it’ll also mark the latest clash between sportswear’s two giants: Nike, which sponsors the French team, and Adidas, which outfits their opponent. As with any high-profile football matchup, there’s even some drama behind the clash of logos – the Argentine star Lionel Messi, likely playing at the last World Cup of his career, was a longtime Nike ambassador before signing a lifetime contract with Adidas in 2017. His arguable successor as the sport’s biggest star, France’s Kylian Mbappé, wears Nike.

Off the pitch lately, the Nike vs. Adidas rivalry has more closely resembled Spain’s 7-0 blowout win over Costa Rica earlier in the tournament. Even before its Yeezy troubles, Adidas was struggling to connect with consumers (a BoF Insights poll of Gen-Z shoppers found that 22 percent named Nike as one of their three favourite brands, double Adidas’ share).

Nike had its own ugly moment with a celebrity ambassador this fall, when NBA star Kyrie Irving shared a link to a film promoting anti-semitic conspiracy theories. But the athlete’s now-cancelled sneaker line was nowhere near as important to the main brand as Yeezy was to Adidas.

Even so, Nike has had to grapple with some more conventional problems: it ordered too much inventory heading into 2022, and it has seen sales slump in China due to the country’s strict Covid policies. Analysts who follow the company say the worst may be over. Nike stores were crowded over Black Friday as it put its excess inventory on steep markdown. And China is edging out of its Zero Covid isolation.

There’s still a chance both issues could drag on Nike’s sales and margins in the coming year – the scope of the company’s inventory overhang surprised the market in September and could do so again. China’s path forward is also murky, and homegrown activewear brands have gained ground during the pandemic. Adidas has a new CEO, Puma’s Bjorn Gulden, to chart the company’s post-Yeezy path.

But it’s not hard to imagine a return to form in 2023, either. Nike’s strong brand gives it an automatic head start when it tests new markets or sales channels, whether it’s a web3 platform or the first Jordan brand store.