The Fashion Cycle, Displayed by Nike
About five days ago, Nike displayed a classic moment in the classic fashion brand cycle. Fashion companies, and specifically clothing companies, move through a cycle all the time. We start at the top. The brand is on fire. Everybody who is anybody is wearing the designs. Other companies are trying to mimic, but it doesn’t matter because the strength of the brand is too much.
The next phase is the cooldown nobody notices. The shame/peer pressure factor is minimized a little bit. It’s not that big of a deal now to be wearing a knockoff of the original brand. This often happens while the original clothing company continues to rake in money. The balance sheet is a lagging indicator.
The next phase is the crumbling of the brand and of the balance sheet. By now, the pillars have been so eroded, and consumers care less and less about the brand. In some extreme cases, it can even become extremely uncool to be wearing the brand. Think Under Armor or Abercrombie and Fitch.
The final phase and this one takes a lot of growth and significant change, is the rebirth of the company. Abercrombie and Fitch is a great example. The company was in shambles after a massive overextension and corrosion of the brand, but they put on a recovery, and are now on fire.
Nike is currently in the third, and toughest, stage of the cycle. Nike has been a great brand for decades, with relatively minor bumps along the way, but in the past one to five years, they have been the best brand. Unfortunately for Nike, they were too good. Nike was in the perfect position, but that position is also the hardest to maintain. Nike was pulling in dump trucks of cash while not becoming uncool or lame, but fear of becoming a lame brand forced them to not innovate, and now they have fallen behind.
Nike is not a geeky brand, obviously, but they are a brand that is much less cool than they were a year or two ago, and that is reflected in their quickly depressing financial situation. Nike is facing competition from brands like Hoka, On Cloud, Adidas, etc. The stock is down 30% over the past year and 60% since its peak in 2021. Revenue was expected to grow 2% across the board, but it is now predicted to slip 5%. That is really, really bad, like, firing your CEO bad.
But just in general, Nike has failed to innovate, and that is a fault of leadership. Leadership instills the culture, and Nike’s culture does not seem to want to innovate, so they have fallen from their perch. Nike’s footwear division needs a major overhaul and some fresh blood, or it may be 20 years from now before we see hype again around Nike.
