2024 was a challenging year for Nike Inc, with global sales declining in both apparel and footwear.
Apparel sales dropped by 2.6%, while footwear sales, which make up 69% of Nike Inc's global sales, fell by 4.8%
Source: Euromonitor International
The decline in its primary product category, coupled with shifting industry and macroeconomic factors, highlighted the need for a strategic re-evaluation across the business. Nike Inc is already taking active steps to address these challenges.
Despite evolving consumer spending habits and values, along with current and upcoming macroeconomic impacts, sportswear remains a resilient category with strong global annual growth prospects. Historically, sportswear has consistently outpaced the overall apparel and footwear market in growth. Over the past five years, Nike Inc's annual performance has aligned with the trends in both the apparel and footwear market and the sportswear market. However, 2024 marked the first instance since 2016 where Nike's performance diverged from global industry and category trends. The decline in Nike Inc's sales in 2024 reflects not market or category dynamics, but rather consumer fatigue with Nike Inc's product offerings and a diminishing perception of its value proposition.
Bracing for global trade impacts and financial implications as a US-based conglomerate
Trump's proposed tax cuts could provide short-term boosts to business investment and consumer income in the US, with higher-income households likely benefiting more than their less affluent counterparts. However, reduced tax revenue might strain government finances, potentially hindering US growth prospects in the medium term. Additionally, the positive effects of tax cuts could be counterbalanced by the negative impacts of supply-side constraints from Trump's other policies, such as increased tariffs and immigration controls.
As a US-based company, Nike Inc is directly affected by Trump's shifting policies on business and economic operations, which also influence global prospects in the apparel and footwear industry. Nike Inc is expected to face significant repercussions from rising import tariffs on internationally manufactured goods brought into the US. Given that much of Nike Inc's production occurs in China and Vietnam, these increased tariffs will have a substantial impact, along with potential higher costs for securing raw materials for its US manufacturing hubs. Ultimately, the increased import tariffs faced by US companies could negatively affect consumers, who may bear the brunt of higher unit prices as brands adjust to the impacts on their bottom line.
Incumbent vs challenger brands in sportswear
In recent years, the emergence of challenger sportswear brands has significantly contributed to the growth opportunities in the sportswear market. These brands have laid the groundwork for newer or lesser-known sportswear companies to connect with consumers. Many challenger brands have prioritised fostering brand loyalty through product innovation, community engagement, and transparency. While these strategies are also employed by market leaders, the sheer size of these incumbents often leads consumers to question their authenticity.
A key factor in the success of challenger brands is their hyper-specialisation in product offerings during the early stages of their development. This approach allows them to establish a recognisable identity based on a specific product line or activity focus. Engaging with smaller, lesser-known brands also presents an opportunity to build a community and appear more relatable, which can drive significant growth and brand scaling. The initial relatability that fosters consumer loyalty and affinity can continue until the brand reaches a peak in its growth cycle.
In 2024, challenger sportswear brands, along with other incumbents, had a significant opportunity to capture a portion of Nike Inc's market share amid its declining global sales performance. This was made possible by the robust performance of these brands, which contributed to the overall growth of the sportswear market, independent of large incumbents like Nike Inc and adidas Group.
Challenger brands have the flexibility to target specific niches that larger companies may overlook. By focusing on underserved or emerging market segments, such as sustainability-conscious consumers, women's sportswear or adaptive sportswear for individuals with disabilities, challenger brands can cultivate strong customer loyalty and build a distinctive identity.
Read our company profiles, Nike Inc in Apparel and Footwear and On AG in Sportswear, as well as How Trump's Economic Policies Affect Industries and Consumer Markets, for more analysis on the drivers of the global market and challengers vs incumbent sportswear players.