Will Nike Inc (NYSE: NKE) Keep Losing Market Share to Adidas In 2018?

January 04, 2018, 11:28 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Nike Inc (NYSE: NKE) recently reported its Q2 fiscal 2018 earnings results, which revealed declining revenues in its core North American market. The largest sportswear company continues to lose market share in its core North American market to its main competitor Adidas, which is headquartered in Germany.

Article Summary

Nike has lost significant market share to Adidas since late 2015.

The company continues to record massive declines in revenue within North America.

The company needs to adapt to changing consumer preferences.

Here’s the trading report on NKE.

There are several reasons contributing to Nike’s decline in its core North American market, which is largely driven by changing consumer preferences in the sportswear segment. Majority of consumers now prefer to purchase fashion-oriented casual footwear and apparel as opposed to performance sports gear.

For many years now, Nike has marketed its sportswear products as being exclusively tailored for consumers who want to perform at the peak levels attained by sports professionals. The company’s positioning as a manufacturer of high performance sports gear worked in the past, but is currently failing due to changing consumer preferences.

The changing consumer preferences are what have caused casual sportswear companies such as Adidas and Lululemon Athletica Inc. (NASDAQ: LULU) to perform extremely well in the recent past. Nike should have changed its market positioning since Q4 fiscal 2016 in order to keep up with changing consumer trends and to stave off the rising popularity of Adidas retro shoes and apparel.  

Nike is not the only sportswear company that has suffered from the changing consumer tastes as even Under Armour Inc (NYSE: UAA) has witnessed declining sales due to its positioning as a manufacturer of performance gym and athletics wear. Nike’s decline is largely due to its failure to adapt to a changing business environment driven by changing consumer preferences, while Adidas has capitalized on the changing consumer trends.

The company seems to be lost given that instead of investing in creating products that appeal to fashion-conscious consumers such as its exclusive Jordan brand, Nike has been laying off staff and flooding the market with Jordans, which has reduced their perceived value among consumers.   

It is highly likely that Nike will continue losing market share to Adidas in 2018 if the company does not implement a major turnaround in its marketing and overall positioning. Nike should design new products that appeal to fashion-conscious consumers and market the new apparel and footwear as casual and fashionable instead of being performance oriented.

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