Investors, analysts question Nike’s wholesale strategy amid gloomy N. American spending

Designer Brands

30/06/2023 15:00

By Katherine Masters and Ananya Mariam Rajesh
       NEW YORK, June 30 (Reuters) - Some analysts and
investors question Nike's  NKE.N  move to sell its sneakers and
clothing through other retailers including Macy's  M.N  as
Americans grow more cautious in their spending.
    Roughly two years ago, Nike said it would pull the plug on
certain wholesale relationships. It aimed for 60% of its revenue
to come from direct sales to shoppers by 2025. 
    But earlier this month, executives at Macy's  M.N  and
Designer Brands  DBI.N , the parent company of DSW, said they
would return to selling Nike shoes or clothing, starting this
fall. On Thursday, Nike CEO John Donahoe said its return to
wholesale distribution of Nike merchandise is "a continued
evolution" of its strategy to reach as many shoppers as
possible, including through department stores and other chains. 
    Nike's return to other retail outlets could reflect a needed
change in its strategy driven by shoppers' return to
brick-and-mortar stores, said Brian Yacktman, president of YCG
Investments. But Yacktman added the decision raised concerns
that Nike was moving back to these retailers in a bid to clear
inventory and meet short-term profit objectives.
    Carolane De Palmas, an analyst at ActivTrades, said Nike's
move does help it adapt to evolving consumer preferences. But it
also "may seem desperate or indicate a flaw in their
direct-to-consumer strategy," she added. 
    Broadly, retailers are cutting back on orders and in some
cases lowering their forecasts to reflect shoppers' caution.
Macy's and Designer Brands cut forecasts earlier this month,
citing a drop in demand and the need to discount in order to get
people to stores. 
        A 
    recovery in China
     helped Nike beat fourth-quarter revenue estimates, though
earnings missed forecasts. Thomas Hayes, chairman of hedge fund
Great Hill Capital said, "With China sales blowing past
expectations ... this beat is auspicious for future quarters'
results."
  
        Nike shares were down 2.5% Friday.
  
        Last month, Adidas said the Chinese market was
improving, although its chief executive warned the group still
faces a bumpy year.

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 (Reporting by Katherine Masters in New York, Ananya Mariam
Rajesh in Bengaluru)
 ((Katherine.Masters@thomsonreuters.com;))