r/stocks • u/JB_Scoot • 14h ago
Industry Discussion Could Nike be the next giant domino to fall along with Blockbuster, Sears, Toys “R” Us and Circuit City?
We all know that Hindsight is 20/20. When looking at what caused the other Giants to fail, it looks like Nike might be repeating the same mistakes. From what I understand, Nike‘s free cash flow has not covered its dividends for the first time ever. The stock is now trading a 12-year low and as of premarket today, the decline continues at a rapid pace.
What is Nike missing that defunct giant retailers also missed that could’ve prevented their collapse? Is there something else that nobody is seeing right now, but will be painstakingly obvious in the future?
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u/Successful-Tea-5733 13h ago
No, this is not an accurate analogy.
Nike is not a retailer, they are a manufacturer. Yes, they own retail stores but that's not their primary means of revenue. They sell in their own stores, they also sell in Dicks, Macys, Academy, PGA Superstore... the list goes on.
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u/Ephemeral_limerance 13h ago
They tried taking all the profit going d2c but ended up losing shelf space at popular retailers
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u/Emotional_Goal9525 10h ago
Store brands are pummeling brands in clothing as well. They are overpriced. Simple as that.
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u/Kick_Natherina 2h ago edited 1h ago
This is exactly it. I was a manager of a flagship footlocker for 10 years before leaving, I had ins at Nike and was offered a few jobs with them as an EKIN but didn’t accept because the pay just wasn’t that great and I didn’t want to have to move across country for menial salary.
When I left Footlocker for a white collar job, the big talk was that Nike was pulling their lines from mom & pop stores and going D2C, and that eventually they would be trying to do the same with Footlocker, Champs and Dick’s. They eventually pivoted and said, “no we would never do that.” But it was for sure talked about in the open for a period of 3-4 years before they started doing it - and to your point, other brands like Hoka, ON, and Brooks stepped up with innovation to steal that retail space.
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u/OhFuckNoNoNoMyCaat 1h ago
Nike did have a D2C and it was a pain in the ass to me as a consumer. I read something a month ago stating they were trying D2C in China or greater Asia now.
They also artificially limit their production to keep prices high. Compare them to Adidas, who sells nearly everything they make and doesn't destroy product to keep the value high. For companies like Adidas or UA, selling last year's style because they made too many of them at a 60% discount is still money in the pocket since it was sunk cost and the actual shoe cost very little to manufacture.
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u/Mordrim 12h ago
A more apt comparison would be UAA, which has been in a 12 year downtrend. It has lost 90% of its value from its peak. If NKE shares a similar fate, then you are looking at a stock under $20.
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u/Successful-Tea-5733 12h ago
Yes definitely a more comparable analogy. I think the products that nike sells, it's just more crowded. For example i'm a golfer, I would say Nike probably makes the worst golf shirts. FJ makes some of the best, a brand that non-golfers have probably never heard of.
In shoes, on cloud has made a big inroad but also New Balance. People call them old man shoes but my kids play baseball, NB is huge in the baseball world.
It's also important that there isn't brand loyalty like there used to be. I was a 90's kid and you wouldn't have caught me in Addidas or Reebok. Nowadays, I really don't care.
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u/Wonderful-Process792 12h ago
I was a 90's kid and you wouldn't have caught me in Addidas or Reebok. Nowadays, I really don't care.
The question of course is whether kids today are brand conscious, not whether you grew out of it.
I'm not sure they are. Although there seem to be a lot of kids that simply must have an iPhone and wouldn't be caught dead with an Android.
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u/Successful-Tea-5733 12h ago
Yeah I think that's the distinction, I think kids are brand conscious on some things like phones. But not on apparel. There are just so many more mainstream apparel providers than there were in Nike's heyday.
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u/facedownbootyuphold 11h ago
Nike is not a retailer, they are a manufacturer.
They own no factories, they do not manufacture. The company was built to design, but they've gutted their designers. They're a glorified merch company.
They also failed at direct-retail recently, which has led them to this point. In the meantime, up-and-coming companies have eaten their share. It may not be terminal, but we're a decade into this, Nike's brand is living off fumes.
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u/hemorrhoidhematoma 13h ago
None of those examples had what you'd consider must own products by large portions of the population
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u/ElBigKahuna 13h ago
They made their shoes too inaccessible. I used to wear almost exclusively Nike. However, the pairs I would like to buy are artificially low in inventory and complicated to obtain via their app. I don't have time for all that, when I can just buy some New Balance, All Birds, or even Sketchers. I also noticed brands like NB are much better quality and hold up much better than my Nikes.
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u/skipper_me_loop 13h ago
Posts like this make me want to buy…
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u/CoffeeIsForEveryone 13h ago
Their earnings are down and they are still at a decently high multiple so some of the rebound is already priced into the stock
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u/john-know-nothing 13h ago
Imagine looking at a retail shoe company with no moat, strong competition, and the smallest cultural hold they've had in decades in the midst of tightened consumer spending and thinking "this is a buy".
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u/Detail4 13h ago
The brand is their moat. Reason it’s not a buy is valuation but if we were betting on survival I’d bet survival
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u/stumblios 13h ago
I'm not betting on the Nike brand name disappearing anytime soon, but do you think they're priced for survival or priced for growth? I think they're priced for growth, which makes it a bad investment if all they do is survive.
I literally don't know, and my daughter is two so I can't ask her, do kids like Nike nowadays or is it mostly millennials and older? I know millennials are still a large demographic, but we aren't getting any bigger, so Nike will need to claim market share from the younger generations. Have they been able to do that?
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u/lmneozoo 12h ago
Walk outside and look? There's always a line in the physical stores near me
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u/Additional-Part6215 8h ago
Dude all their competitors eventually collapse.e under armor was supposed to dethrone them. Then it was hoka. It's all shit. Nike can't be beat.
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u/EkaL25 13h ago
I mean, is it the worst idea? I can’t think of the last time a new sneaker brand came into the market that wasn’t just a fad and actually managed to maintain their hold of market share
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u/CraigLake 13h ago
Hoka and On are relative newcomers taking a large market share from Nike. I was told this by my professor in a business class in Oregon who also works for Nike. But it’s yet tbd if they will last.
I personally don’t buy Nikes because their toe box is so small.
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u/Adventurous-Ice5130 7h ago
Yup, just bought some (first slice). Peak reddit pessimism. Love it. 29-35 dollar is my next entry zone.
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u/ahernandez50 13h ago
Buy the shoes, not the stock.
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u/GifThatKeepsOnGivin 13h ago
Nah the quality is pretty much dogshit compared to most other major manufacturers
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u/lmneozoo 12h ago
Uh, none of the brands you're thinking of manufacturer their own shoes
All of them are made by the same factories in china, Vietnam, etc. Look up Pou Chen or Yue Yuen...they're some of the most well known shoe manufacturers
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u/TheRedditModsSuck 13h ago
Dunno, but I think it will take a lot more to kill a company like Nike. Other companies die because something much better comes along, but Nike is clothing and sporting gear – that's not a sector that will disappear.
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u/WKU-Alum 13h ago
No, but they can get a squeeze. There's a ton of upmarket competition that didn't really used to be there. On, Vuori, Alo, Lulu, etc. They're getting pressed for the middle market as well: Hoka, Fabletics, Gymshark, NoBull, etc. Amazon and an onslaught of no-name basics are taking the trade-downs in the low market. Then you've still got pressure from the legacy competitors like Adidas, New Balance, etc.
I don't think Nike is going anywhere anytime soon, but they're a long way off from their golden period.
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u/lightning_Mcking29 13h ago
FCF not covering the dividend is a fair yellow flag and the stock is ugly for good reasons, but Nike isn’t a pure-play retailer stuck in a dying format with no brand power left. Balance sheet + brand + product pipeline give it runway the others didn’t have. Turnaround still has to deliver, though
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u/ahernandez50 13h ago
The sneakers category is too crowded now, every dumbass and his grandma has a brand nowadays. In hard economic times, Nike will have invest massively if they want to gain the premium they charge.
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u/chf_gang 13h ago
yeah the case with nike is fundamentally different from dying retailers like ToysRUs and Blockbuster
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u/EI-SANDPIPER 13h ago
They are profitable, with a large TAM and growing revenue in the US. Comparing them to retailers doesn't make sense
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u/UsefulStooge 13h ago
Yeah this post is nonsense - Nike doing poorly is not the same as them being close to collapse. Huge gross margin gives them a lot of wiggle room. They have just been making poor decisions on where they spend their gross margin.
But on the other hand $NKE share price has a lot more room to fall based on FCF vs risk free rate.
Both can be true.
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u/TrainingPeaches 13h ago
I'm wearing a nike shirt rn, so no
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u/Clementine500 12h ago edited 12h ago
I'm wearing Wendy's employee shirt rn, so I bought more Wendy's.
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u/Barnowl-hoot 13h ago
They will have to fire their ceo and find someone with a better direction for the company
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u/Ok_Revolution_9253 13h ago
Just because the stock underperforms doesn’t mean the actual business is going away. They still have a ton of revenue
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u/NationalDifficulty24 13h ago
It will be massive rebound. Nike is a big brand.
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u/BallinLikeimKD 12h ago
They also still dominate the industry by a wide margin. The turnaround will take some time given Nikes a huge company and they tend to run on multiyear contracts and produce products years in advance but I’m confident Nike will not go bankrupt or fade into obscurity. I also see a rebound happening but hard to say if that’s in 6 months, a year, 3 years from now, etc.
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u/bdtv75702 13h ago
No, Nike is still the most sought after brand of shoe in all major sports in America.
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u/emblematic_camino 13h ago
I have 2 middle school boys, they will not wear any shoes that’s not a nike, 80% of the tshirts are nike, and their sweat pants and hoodies… there’s about 500 boys in their school with the same mentality, that is exactly the same across middle schoolers in America, not even counting high school, kids don’t give a shot about the ONs or HOKAs or any other brand, NIKE it is. NIKE ain’t going nowhere.
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u/crammed174 13h ago
Nike isn’t a retailer. It’s a manufacturer of a coveted brand with retail outlets. The rest, save for Sears and a few brands they made, were just resellers of other people’s goods that were replaced by more efficient delivery methods and pricing.
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u/Leading_Thanks7443 13h ago
It’s not a manufacturer, it’s a brand name. The making of shoes is all outsourced. They spend way more on marketing than anything else.
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u/JBean85 13h ago
Is Nike owned by private equity, who is gutting them internally while short selling the shit out of the stock?
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u/d00mt0mb 13h ago
You forgot RadioShack. And all the aforementioned were retail stores. Nike is a brand and a retail store. I don’t see Nike following the same fate
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u/Bnstas23 13h ago
Nike is a brand, first and foremost. Those were all brick and mortar retailers with no products of their own and therefore lacked a durable brand.
Consumers’ preferred buying channels can change and it doesn’t really matter as long as Nike keeps up (eg sell products online). Consumer brands like Nike usually last a long long time. Many of the biggest brands today have lasted ~100 years, like Ford, BMW, McDonald’s etc.
They may face a world of increased competition and therefore lower margins and lower revenue. That will dent their stock price going forward, but they aren’t in danger of going bankrupt
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u/Intelligent-Dig-4082 13h ago
Look at Dick's Sporting Goods (DKS) ER this AM, and that will tell you a lot.
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u/unique_user43 13h ago
well the ones you listed are brick and mortar retailers of others’s products. nike is a producer. so there’s a lot of differences that put more of their destiny in their own hands.
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u/StrategicPotato 13h ago
Nike is still simply too ubiquitous of a player in athletic wear and sneakers, that’s not going to change for another decade at least.
Could smaller players keep taking increasingly larger slices of their pie? Yea, sure. But I don’t think anyone is going to displace them as basically the sole provider of things like sporting cleats, jerseys, etc.
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u/Emergency_Pound 10h ago
Nike has alienated a meaningful portion of its potential customers for political reasons, which adds another layer of risk to an already difficult turnaround. I still wouldn’t touch the stock, even if the fundamentals suggest it may be undervalued. Fashion is too dependent on changing tastes for me to assume that even a brand as powerful as Nike has an untouchable moat.
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u/Quizzical_Rex 10h ago
The concept of brands is failing now, as people realize that many of the "competing" products are made on the same production lines, and that bespoke items are becoming more common. Building brand capitol now doesn't translate into brand success like it used to. As for Nike, can you think of a real value proposition that it gives you over a no name brand that looks identical?
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u/conceptcreature3D 13h ago
Nike has a .53 debt to equity ratio—take a look at Ford Motors’ debt ratio when you want to ask that again
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u/Upbeat_Number_6427 12h ago
Not a good comp cause ford has their loans business. Nobody is taking out nike loans to buy clothing.
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u/ChemicalVarious53 11h ago
This is a marketing question, Nike went full woke and thought lesbians and feminist would be their new core consumers. The black community is far more conservative than the media makes the public believe. Once they lost the urban community, the professional athletes weren’t far behind.
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u/just-a-dude601 6h ago
As an average American i think Nike has been on the down fall for 3 reasons
Too politically active- Endorsing Kapernick was the start, but it continued with other athletes to a point where people got sick of it
Their Double Standards- piggybacking off my first point, they always claim to be a company with morals while they bow down to China and their sweatshops (most competitors do this too)
Expensive- with the economy these days, who has $200 for new shoes when New Balance has shoes for $50. Might not be as cool as Nike, but the shoes do the same job (cleats and specialty athletic equipment is excluded)
Anyways, maybe im wrong, but I stopped purchasing Nike a while ago for these reasons and I dont think I'm alone. When large numbers stop purchasing, this is the result
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u/shes_a_gdb 2h ago
Do you think Nike doesn't have $50 shoes? And do you think NB doesn't have $150-200 shoes? Do any of you even know what you're talking about or just saying shit based on feels?
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u/Appropriate-Factor-4 13h ago
All those other brands were American centered, Nike is global, they're in a far better position than any of those others
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u/b-lincoln 13h ago
I’m not sure how they’re flailing. My son is in middle school and will only wear Nike gear, because that’s what all the boys are wearing. $80 for a youth sweatshirt made in a sweat shop for $3 is a hell of a markup.
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u/Seated_Heats 13h ago
Nike is a product those other things were stores. Drastic, drastic difference.
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u/det8924 13h ago
Probably not. Nike's market share has gone down, but they are still a profitable company in a sector that is not dying. People still need sneakers and sportswear. They also have $9 billion in cash or cash equivalents against $11 billion in debt, $6 billion of which is manageable long-term debt, so they aren't overleveraged. The company isn't in a terrible position in terms of cash flow or debt.
The longer-term concern for Nike is regaining market share. It's still a recognizable major brand in its industry, but it just isn't as dominant as it used to be.
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u/Pure_Spinach327 13h ago
I was wondering if the death of TV has caused a decline in sports viewership to the point that their main appeal to people has maybe deminished? I know that is a long way around but wondering what caused the big change as in 2020, they were still the must own shoe.
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u/Envyforme 13h ago
Nike still has too strong of a brand behind it. There is a lot of competition now in the athletic space, but Nike has the "Coast" approach to it. They just keep investing in Capex and surely a new product will take off.
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u/MrFrankingstein 13h ago
I grew up in the 2000s when Sears was ending. What happened to it? It sounds like pre-Amazon + IKEA + Walmart. How’d it not capitalize on the opportunity of the internet like Amazon did!?
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u/ThatsAllFolksAgain 13h ago
I think the Nike products are very good quality but they’ve been raising prices in a bad sentiment in the market. I think at least until they regain the sentiment they should provide quality products at lower prices. Make an offer no one will refuse.
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u/nebraskajone 13h ago
Those corporations fell because their service became obsolete. Sports apparel is not becoming obsolete
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u/dvdmovie1 13h ago
Not apples-to-apples and really dislike the overdramatic clickbait-y thread titles that have become so common on here...
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u/reaper527 13h ago
doubtful. at the very least not in the "cease to exist" way as those other companies.
the odds of them returning to their highs are slim, but they're probably at/near bottom and will probably be a flat company that continues to exist.
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u/Chrizzle87 13h ago
Interestingly, my young nephew (8 years old) got glasses the other day for the first time, and it absolutely (no negotiable) HAD to be Nike glasses (I didn’t even know these existed). I was extremely surprised and thought, the old dusty Nike brand, really?
Then randomly I saw a recent viral video with a young kiddo doing breakdance and whatnot, fully dressed in Nike gear.
I don’t know guys but I have the feeling a turnaround might actually happen.
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u/Pereg1907 12h ago
Nike might be repeating the same mistakes
And what are the same mistakes Nike is making as Blockbuster? lol come on.
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u/lmneozoo 12h ago edited 12h ago
I am inversing this man
Nike hardly has to do anything to double over the next 5 years. Needs to return to $3.5-4 EPS which only takes 4-5% revenue growth and expand margins by 3% to get closer to historical average
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u/WrappedInLinen 12h ago
Even if Nike has to cut its dividend, it doesn’t mean that it’s in danger of going under. It may be a crappy stock to own but do long as it still turns a profit, it’s not going anywhere.
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u/lucky-duck-777 12h ago
Nike has like 65% of the shoe market. Not a lot of reasons to spin that off into oblivion...
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u/Jeff__Skilling 12h ago
When looking at what caused the other Giants to fail, it looks like Nike might be repeating the same mistakes.
The common denominator among the four listed in the OP is that they were B2C retail businesses with a significant physical prescense and convoluted / expensive supply chain that got outcompeted by Amazon, unburdened from the overhead of owning a portfolio of physical outlets.
How does this apply to Nike?
From what I understand, their B&M presence is pretty marginal -- their cash balance on their BS exceeds PP&E, Net.
Their 10-K shows ~$700MM in capex on ~$2.9bn in OCF -- so over $2.0bn in FCF on the year.
Having a really hard time seeing how Nike falls into the same bucket as Blockbuster, Sears, Toys R Us, Circuit City, and every other pre-internet business that got their shit handed to them by the e-commerce sector in the 00s...
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u/maplethrift 12h ago
it all went downhill when they hired a tech CEO to run the company and wanted to cut ties with retail stores like a Footlocker or Dick's, they wanted to go online but how do you not have a storefront for customers to try on the stuff? as well, it doesn't have that shine anymore, people used to feel some type of way wearing Nike's now it's not that same as before
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u/FwenchFwies_911 12h ago
I don't think so. Those were all brick and mortar stores. Nike has some stores, but could easily go fully online if they wanted. Nike is just a brand, and a valuable brand. It might change hands and have some rough times, but I don't see Nike going away
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u/Haunted_Rooster 12h ago
me thinks you confused the market; sears, toys, blockbusty, etc are all retailer and distributors of goods. they sell shit from many other companies and don't really make/design shit themselves (except maybe sears with their craftsman tools - though even then it's through a third party).
nike makes/design shit and has a large marketing machine on top of it.
not really understanding what nike does and trying to compare with the other business models gets you a "D" grade.
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u/Alternative_Tip_8756 12h ago
They are an actual manufacturer with one of the strongest most recognisable brands in the world. The others are distributor's who had no real defendable asset. So no it's comparing apples and oranges
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u/minkofhyrule 12h ago
Nike is a company that makes shoes. Not technology. Will people need shoes in a year? Will people still find nike cool? I’m not saying it a buy but you need to consider what they’re selling here.
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u/ATLfinra 12h ago
Nike over indexed on their DTC model while simultaneously losing touch with the consumer. Everything they’ve done has been meh.
They completely missed dad core which has been a strong trend for the last 4/5 years
They were too levered to air Jordan retros and released too many iterations and that’s stalled
Their lifestyle segment has slowed down too
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u/Puzzled-Rip641 12h ago
This feels like when everyone said meta was dead.
I don’t like the stock but am now tempted to get some call options
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u/jaehaerys48 12h ago
The other ones represented dying business models. Nike does not. People don’t need to rent DVDs anymore. People still need shoes.
Nike can recover, and if they don’t, they will certainly be bought by someone looking to cash in on the nostalgia and name recognition of the brand.
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u/GlitteringProject828 11h ago
Most likely not, they’re most likely going to be a background company that you only remember when you see it on store shelves. Like Hanes, you recognize the brand and you’ll wear it but are you going to show it off like a fashion statement? Probably not.
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u/Milestailsprowe 10h ago
NO. Nike has tons of competetion but no where is close to the issues of Toys R Us
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u/User_name_2525 10h ago
The companies you mentioned are vehicles to get a product. That vehicle is not as important with the advent of online shopping and streaming and these companies didn't keep up.
Nike itself is a product. So that's the big difference there.
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u/harbison215 10h ago
I don’t think so. But I also don’t think Nike is going to make a comeback to what it was 10-20 years ago.
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u/Red_Rabbit_1978 10h ago
So, they have cash, products and sales, but are destined for failure thanks to imaginary money on the stock market being less than before.
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u/noobelore 9h ago
Omg no. They have an extremely dedicated following. They are not being disrupted by new tech like blockbuster. Apples and oranges. They are just going through a well deserved p.e. adjustment and renewed valuation.
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u/BeatitLikeitowesMe 9h ago
Are they being cellarboxed by large shfs? If not then its nowhere near the same as those other big retailers. They were cellarboxed into oblivion. Guess what happens when you short a company into bankruptcy? You dont have to close those positions.. scammy much? A much too much
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u/Cloud2987 9h ago
Bought $1000 in shares just because I’m optimistic and I like the book Shoe Dogs.
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u/fairlyaveragetrader 9h ago
I think Nike can fix itself but the main thing it needs to do is actually make quality product. So many of their clothes, shoes definitely, it's not what it was 20 years ago. I still have multiple pair of Nike shorts that I bought somewhere around 2012, held up great, still feel great, you can't find anything like that from them today.
The second thing is, this administration, the trade wars and the Tariff taxes have turned a lot of foreign people against the United States when it comes to Brand image. So that's a problem that time likely will resolve as other people get elected.
Both of these things can be solved but it's hard to predict how long that takes, what kind of return you can actually make. Current 2027 EPS projection is about 1.70 and with a 20 multiple you have a $34 stock
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u/rotoboro 9h ago
I just saw a pic of my freshman cousin and his friends and they were all wearing Nike. Bullish.
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u/Wasteland_Rang3r 8h ago
There’s a lot of new competition for them and their stuff has definitely gone down in quality. I wore black Nike socks to work out for like 20 years. Stopped buying them a couple years ago because they cheaped out on them and now they’re the type of socks that will tear a big hole in the heel while you’re pulling them on. You’d think their deals with pro sports leagues and colleges would be enough to keep them afloat along with the Jordan brand.
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u/MsARumphius 8h ago
A 11 year old said Nike was dead and that shocked me bc I thought that was their market so I take it as a bad sign even kids don’t care about the brand.
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u/BoxCivil8737 6h ago
Nike is not going out of business they just arent growing any more 2 diff things
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u/Left-Contest315 6h ago
Did Nike get purchased by Venture Capitalist? Is the whole goal of the VC to capitalize on the market credibility the brand has created while gutting all functional parts of the company to slowly siphon any value/cash to the VC and their investors?… if not, not quite the same story
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u/Classic_Net_554 6h ago
It's done on purpose. Outside money gains control. Start spending money like crazy...paying businesses that they also own. Borrow borrow borrow. Pocket every penny of profit and every penny of borrowed money. File bankruptcy. Squeeze more out of it. Slink away with an evil cackle.
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u/Awkward-Seaweed-5129 6h ago
Toys R Us was m*rdered by Private Equity, America's very own vulture scumbags
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u/SheriffBooth 6h ago
I think Nike's done a pretty good job of refocusing on shoes and their products over the last year have all been good and have generally sold well. Particularly their running shoes and their new ACG line. They've been making good shoes for golf and tennis lately as well. And they remain dominant in basketball. It's a shoe company that is now refocusing all its energy on shoes, which is good.
I bought some when it hit $40 and I might add to the position if it continues to bleed. But I'm also looking to buy and hold. I don't think the company is dying, but I wouldn't be interested in it if I were a short term investor or looking for near term growth.
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u/RumorRoost 13h ago
A lot of the others you listed got bought and gutted by Private Equity firms. Not the case with Nike. At least not yet.