Why Have Nike’s Future Orders Been Falling In North America?

October 4th, 2016 by Trefis Team
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Nike‘s (NYSE:NKE) stock price has dropped by almost 6% since the last earnings was announced this week on the back of weak future orders and bloated inventory figures. Excluding currency fluctuations, the company has seen a fall in future orders by about 5% in the U.S. Overall the sportswear giant reported a 3% drop in future orders worldwide. Future orders are indicative of demand for Nike products and has a direct affect on sales. This news has shaken investor confidence as this the third straight quarter (and the lowest in five quarters) in which the company has reported future orders figures below analyst expectations.

Future Nike

Nike is facing increased competition from competitors like Under Armour and Adidas, mainly in footwear. Ever since signing Stephen Curry on, Under Armour has managed to grab a larger market share in the basketball footwear. The Curry series of basketball shoes have outsold Nike’s Jordan and LeBron series in the last few quarters, forcing the company to release cheaper models of its KD and LeBron shoes in an effort to regain some of the lost market share. This move is bound to affect margins.

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Adidas on the other hand has benefited greatly by snatching up Kanye West from Nike in 2013. The German athletic wear giant has managed to increase sales of its fashion shoes — specifically the Yeezy, Original and Retro collections. In the last quarter, the company posted a sales increase of close to 31% in North America. The company expects high sales figures in coming quarter as well, while Nike expects a weaker-than-expected quarter, posting sales in the mid single digit range.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment / ask questions on the comments section

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our full analysis for Nike

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