Retro 'Space Jam' Hit Fails to Solve Nike's Sales Woes

By Sara Germano 

Nike Inc. said a sneaker homage to the cult classic film "Space Jam" was a smash hit, but the retro shoes were a rare highlight in otherwise troubling results for the world's largest athletic company.

In a conference call late Tuesday, Nike Brand President Trevor Edwards said a recent rerelease of a sneaker worn by Michael Jordan in the 1996 film was "the largest and most successful shoe launch in the history of Nike." Nonetheless, the company's sales missed expectations and profit margins were squeezed.

Shares of Nike fell 6.4% to $54.32 in afternoon trading Wednesday.

For decades, Nike has built market share on the strength of its coveted sneakers, especially those worn by Mr. Jordan. But the business model by which those shoes are sold is changing, as the company is moving away from its traditional role as a wholesaler and tightens its grip on product releases.

The Space Jam 11 shoes went on sale for $220 in December at Nike stores as well as at two major retail partners, Foot Locker Inc. and Finish Line Inc., according to SneakerNews. Nike declined to clarify how it quantified the Space Jam 11's success, but said the shoe was also available on its direct-sales app, SNKRS. The company typically releases a handful of limited-edition sneakers each month.

Other information reported by Nike on Tuesday revealed its business is slowing. Shipments of its products to wholesalers in the next six months are down 4% world-wide, the first time that metric has been negative in more than seven years, according to Citi Research.

To combat recent inventory gluts and promotions, Nike said it plans to more tightly control supply of its shirts and shoes in its home market. External data show domestic consumers are pulling back spending on sneakers; U.S. retail athletic-shoe sales fell 14% to $1.3 billion in February, according to NPD Group.

Nike's basketball business has been challenged by Under Armour Inc., which two years ago launched a line of sneakers endorsed by NBA star Steph Curry, as well as a resurgent Adidas AG, which has regained market share with its own classic sneakers.

As part of a basketball-themed "triple-double" strategy, Nike executives on Tuesday reiterated their goal of doubling the company's direct sales via its website and stores, a plan that could affect how many highly-coveted retro shoes are released to big sneaker retailers.

Some analysts pointed to what Nike didn't say on the call, specifically the company's lack of revenue guidance for its next fiscal year. "Management gave more limited preliminary annual guidance than past Q3 periods, noting that that the guidance will be appropriately cautious given the broader retail environment," wrote Citi analyst Kate McShane.

Write to Sara Germano at [e-mail]

(END) Dow Jones Newswires

March 22, 2017 14:23 ET (18:23 GMT)

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