After its softest quarter in six years—with flat Q4 sales in North America—Nike is staking a lot on the Olympics in Rio, its expanding basketball line and current effort to clear out excess inventory, Reuters reports. The company’s North America operations provide nearly half its overall sales.
Competition with Under Armour and Adidas is stiff these days, with Adidas in particular highly focused on its turnaround after slipping to number three in the sportswear space. But NPD analyst Matt Powell characterized Nike’s troubles as a “soft patch” that’s fairly easily remedied, according to Reuters.
Nike's share of the U.S. athletic footwear market fell to 53.3% in the first six months of this year, from 55% in 2015, while Adidas is on the rise, to 6.3% from 4.2%, according to market research firm NPD Group, cited by Reuters.
Nike brand chief Trevor Edwards brushed off major concerns about the brand in an interview with Reuters, expressing confidence in the the company’s roster of sponsored athletes and noting that the Rio Olympics is an opportunity to show off the brand.
”When it comes to great athletes, I'll take the Nike roster any day,” Edwards told Reuters.
Nike has sponsorship deals with more than 8,000 athletes worldwide, including basketball players LeBron James and Kyrie Irving, women's tennis star Serena Williams, and soccer players Cristiano Ronaldo and Neymar.
Analysts of late have questioned the staying power of athletic footwear sales at both Nike and Under Armour. There’s reason for concern: While basketball powerhouse Michael Jordan, though long retired from the game, continues to draw customers—Jordan sales rose 18% to $2.8 billion for the fiscal year—Nike brand basketball shoe sales fell 1% to $1.4 billion.
The brand is also seeing renewed competition from Adidas, which announced growth that outpaced both Nike and Under Armour in the first quarter this year. Adidas is taking a slightly different approach to Nike in terms of endorsement deals, though, opening them up to not only athletes but also creatives like rapper Kanye West.
Edwards’ contention that Nike has drawn down its inventory was met with some skepticism from analysts too, with FBR Capital Markets & Co.’s Susan Anderson noting that there’s likely excess inventory at Nike outlet stores and off-price stores like T.J. Maxx, according to Reuters.
"I'm skeptical because we saw a pretty big slowdown in North America last quarter, so for it to flip around so quickly usually does not happen," she said. "There is some inventory build in North America that is going to take a while to work down."