Nike Air Force 1 and Nike Pegasus sneakers are everywhere. That’s a problem for Nike, and it wants to make them harder to buy.
Nike is scaling back production of these classic sneaker lines to prevent discounting and make room for its newer lines.
The Air Force 1 and Pegasus are staples of Nike’s sneaker lineup, and some of Nike’s oldest sneaker lines. The Air Force 1’s are known for their all-white design, while the Pegasus have large Nike swooshes on their mid-sole. They are both marketed for everyday wear, but growth has slowed for these lines and other Nike products, and stores have been promoting the shoes more frequently to clear the glut off shelves.
This is a risk for Nike, which sees itself as a premium brand that wants to protect its ability to sell merchandise at higher prices and prevent products from being discounted too heavily.
So Nike is cutting back supply to try to juice demand and sell them at full prices. Nike also wants to push shoppers to buy new, higher-priced Air Max shoes and newer Pegasus products.
“We are in the midst of shifting our product portfolio” toward newer lines, Nike finance chief Matthew Friend said on an earnings call Thursday. “We are pulling back supply of classics such as the Air Force 1, and we’re reducing supply of Pegasus.”
Nike’s moves could also make it harder for consumers to find traditional white Air Force 1 sneakers and Pegasus versions at shoe stores.
But loyal Nike customers will transition to other Nike shoes, said Christopher Burns, a sneaker industry analyst and founder of Arch USA, a sneaker and lifestyle blog.
And it won’t impact sneakerheads like Burns much. Sneaker collectors focus on limited-edition and special collaboration lines — not mass market lines like Air Force 1, he said.
Still, Nike’s strategy will impact sales and could backfire if consumers aren’t keen on its new styles.
Nike said the cutback will hurt its sales during its upcoming fiscal year. Sales during the first half of the year will fall to low single-digits, the company said.
“It’s the right strategy long-term, but it’s unclear how strong new styles will resonate,” said Randal Konik, a retail analyst at Jefferies.
Consumer slowdown and competition
Nike’s move to slash supply comes as the company faces a consumer slowdown for discretionary goods and tough competition from upstart running brands like Hoka and On.
Customers are changing their behavior, passing up discretionary purchases of expensive sneakers and athletic clothing for basics and experiences such as concerts and travel.
Nike slashed its revenue outlook for the year and said it was looking for as much as $2 billion in cost savings in the next three years. In January, Nike cut 1,700 employees.
Nike is also facing new competition.
Hoka, a French brand founded as a running shoe for hardcore marathoners that soon caught on in the mainstream, is growing.
Known for its chunky insoles, even President Joe Biden was photographed earlier this week striding out of the White House in a new set of Hoka sneakers — far from a Gen Z-endorsement, but a sign that a once virtually unknown brand is making a dent in sales and visibility.
Meanwhile, Nike has also changed its distribution strategy.
The company in recent years has slashed the number of traditional retailers it sells its goods to while shifting to grow directly through its own channels, especially online. Nike has said it can make more than double the profit selling goods through its own website and physical stores than it can through wholesale partners.
Nike has said it would focus its resources, marketing and top products on just 40 select retail partners, such as Dick’s Sporting Goods and Foot Locker.
Source: CNN
