Making adjustments: American skateboarder Gavin Bottger at the Nike event in Paris. The world’s largest sportswear retailer hopes it can reignite its fortunes after a tough year and will have the Paris Olympics kick off a three-year product development cycle. — AFP
NEW YORK: Nike Inc picked the Palais Brongniart, the former home of the Paris stock exchange, as the venue for its most high-stakes product launch in years.
On display behind the Corinthian colonnade this past week were a barrage of new product developments that Nike hopes can reignite its fortunes after a tough year.
There’s a new Alphafly built for marathoners, improved track spikes, boots for footballers and a new basketball shoe.
But the main draw was the 41st iteration of its Pegasus shoes, the centrepiece of Nike’s running business, and a premium version that the company is aggressively fast-tracking to market.
“Force and speed are part of our machine going forward,” Heidi O’Neill, Nike’s president of consumer and marketplace, said in an interview. “We cut almost an entire year off of the innovation.”
These shoes, unveiled ahead of the Paris Olympics set for July, kick off a three-year product development cycle that will shape Nike’s future, and there’s a palpable sense of urgency among top management at the world’s largest sportswear retailer.
Nike has stumbled badly over the past several quarters, with a sales slowdown and inventory issues rattling its operations.
In December, chief executive officer John Donahoe laid out a plan to cut as much as US$2bil in costs over the next three years, including layoffs that will slash 2% of the company’s workforce.
Wall Street has been concerned about demand for Nike shoes, worrying that it’s over-reliant on older models and isn’t releasing enough new goods quickly.
Nike expects revenue to fall by a low-single-digit percentage in the first half of its financial year, which starts in June. The stock is down 15% so far this year.
Donahoe told investors and analysts in March that Nike isn’t living up to its potential and that he’ll be making adjustments.
He said Nike needs to refocus on sports and speed up product development to keep shoppers interested.
“Management has acknowledged a need for big changes,” Lorraine Hutchinson, an analyst at Bank of America Securities, wrote in a note to clients.
“Innovation has lagged in recent years, and new product development and launches are key to the return to growth.”
The running sector has been a particularly competitive category, with upstart brands from Switzerland’s On Holding AG and California-based Deckers Outdoor Corp’s Hoka.
On broke US$2bil in revenue last year, and Hoka’s annual sales are over US$1bil, taking a bite out of Nike’s market share.
Berkshire Hathaway Inc’s Brooks Running Co is also coming off a record year, breaking US$1bil in sales in North America alone.
In response, Donahoe has vowed to refresh Nike’s top running franchise, the Pegasus, in 2024. He said Nike would dial back supply of the existing version along with classic kicks like Air Force 1 basketball shoes to make room for newly developed items.
“Coming out of the pandemic, we became a little bit risk-averse,” said John Hoke, Nike’s chief innovation officer, who was named to the new role in November. “We have a very aggressive agenda.”
The beginning of that agenda was on show in Paris, with all hands on deck. Not all went smoothly, with the high-cut bottoms of one Nike design for a women’s US Olympic uniform drawing controversy.
Back at headquarters in Beaverton, Oregon, management had even called on Nike executive chairman Mark Parker, who stepped down as the company’s longtime chief executive in 2020, to help with the finishing design touches for the new Pegasus.
That Pegasus 41, outfitted with new foam that meets the shoe’s usual air cushioning systems, is set to reach consumers in June through Nike’s online store and its retail partners.
The Pegasus Premium, with a new full-length air layer, will come out in the spring of 2025.
Executives declined to share what else is planned for this vital multi-year cycle of new products.
Hoke said that Nike’s proprietary Air technology, used throughout many of its sneaker lines, is a top priority and a key differentiator.
Eyes will be on Nike’s sizable roster of athletes in several upcoming running competitions as well, as the shoe brands all try to prove their performance capabilities and compete for wins that might sway consumers who are on the fence. — Bloomberg
