One of the most coveted sneakers ever made is a pair of black-and-yellow basketball shoes called the Wu Tang Dunks, released by Nike in 1999. Legend has it that only 36 pairs were ever produced and given to friends and family of the Staten Island hip-hop group. But when the world’s largest sportswear company announced a commercial release of the shoes last week, posting a photo of the shoes on Nike Sportswear’s Instagram account, some collectors freaked out.
“It’s hard not to think of this as unrelated to Thursday’s disastrous earnings call,” wrote Mike Sykes, author of the sneakerhead newsletter The Kicks You Wear. By taking a highly collectible item and offering it for sale to the general public, he said, “it feels like Nike is just trying to sell us fluff and hopes we’ll forget how old the stuff is.”
Nike is in crisis. On June 28, the day after executives issued a dire forecast for the year ahead, shares fell 20 percent in the swoosh’s worst day since its 1980 IPO. Consumers aren’t as fond of the brand’s classic shoes, such as the Air Force 1s, Air Jordan 1s and Dunks, as they once were. Wall Street, disappointed with Nike’s shares, which have fallen 30 percent since the beginning of the year, is openly calling for a “regime change” in upper management.
“A tech executive taking on a consumer products company and changing strategy has proven to be the wrong approach,” said Jim Duffy, managing director at Stifel. That tech executive is said to be John Donahoe, CEO of Nike since January 2020, who previously headed eBay and ServiceNow.
During his time at the sneaker giant, Donahoe oversaw two massive restructurings that led to hundreds of layoffs and reorganized Nike into men’s, women’s and children’s categories instead of divisions focused on individual sports. For the quarter ended in May, revenue at Nike fell 2 percent to $12.6 billion, compared with the year before, while direct-to-consumer sales fell 8 percent over the same period. The company said it now expects Nike’s fiscal 2025 revenue to fall “mid-single digits,” compared with its previous forecast of incremental growth.
In a statement issued on the day of Nike’s stock collapse, the company’s co-founder and largest shareholder, Phil Knight, said: “I have seen and wholeheartedly believe in Nike’s plans for the future. I am optimistic about Nike’s future and John Donahoe has my unwavering confidence and full support.”
Donahoe was initially seen in his tenure as a breath of fresh air at Nike—embracing change and eager to address demographic disparities at the headquarters—and as someone who had Knight’s ear. The onset of the pandemic accelerated an existing plan to focus on higher-margin direct-to-consumer sales, particularly on Nike’s website and apps.
But as the world emerged from Covid-19 lockdowns, “Nike took its eye off the ball,” Duffy said.
A major drawback came this spring, when Major League Baseball began its season. The uniforms supplied by Nike were see-through and the lettering appeared small and cheap, leading to complaints from players and scorn from fans on social media. In May, MLB commissioner Rob Manfred issued a statement saying the league had “listened to our players” and was working with Nike to fix issues, including discoloration from sweat and adjustments to the uniform’s lettering and colors.
One longtime employee who left voluntarily during Donahoe’s tenure said the MLB debacle “never would have happened” if Nike’s internal structure had focused on teams for every sport, including baseball. Successive rounds of layoffs — Nike has cut some 1,940 jobs since 2020, according to documents filed with the Oregon office for laid-off workers — combined with the reorganization of sports categories into silos for men, women and children, has disrupted that focus.
Moreover, by shunning longtime wholesale partners, rival brands like Hoka, On and New Balance were taking Nike’s market share from chains like Foot Locker. In its semi-annual survey of teens, Piper Sandler noted in April that Nike’s position as the top favorite shoe brand was beginning to falter, down more than 2 percent in six months, while New Balance was the biggest gainer.
Martin Hoffmann, co-CEO of On, told investors during a conference call in March that the brand’s share of direct-to-consumer customers under 30 now stands at 29 percent, compared with just 24 percent in 2021. The company has more than doubled sales in that period.
Duffy, the Stifel chief executive, said these statistics not only underscore that On is now resonating with younger consumers, but also that much of the broader growth in athletic brands is coming from older adults — a trend that Nike has missed.
“Traditionally, the ideal age range was between 15 and 35,” he said. “But a lot of older adults are now wearing sneakers to work, sneakers to travel, and embracing that smart-casual look.”
Matthew Friend, Nike’s chief financial officer, said some of the company’s recent initiatives are starting to pay off. Bookings by retail partners for Nike footwear this fall are up “double digits” from a year ago, led by the June release of the Pegasus 41, a performance running shoe.
On the other hand, younger consumers don’t have the same attachment to some Nike classics, such as Jordan sneakers, said Sykes, author of the Sneakerhead newsletter.
“It’s been decades since Jordan played basketball, and Gen Z has no connection to the guy,” he said. “Back in the day, you’d see people wearing Air Force 1s or Dunks or Jordans on special occasions. Now, you have people wearing multiple pairs of Asics or even Crocs.”
During a conference call with analysts, Donahoe said the company plans to “cut back” on its three biggest sneaker franchises, including the Jordan 1. Nike and its biggest competitor Adidas often roll out and limit certain best-sellers, such as the Air Forces and Superstars, respectively, to manage demand.
“It’s a great time for the footwear business, but not necessarily the best time for Nike because they’ve been so dominant for the last 20, 30 years,” Sykes said.