Supply chain issues are accelerating change at Nike

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The compression of sneakers

  • Nike releases third quarter results on March 21
  • In its last two updates in December and September, the company said supply chain issues were holding back sales growth.
  • Nike continues to shift sales more to its own channels, threatening wholesalers

In September, Nike told analysts that supply chain issues, including sneaker factory closures in Vietnam, were hampering its ability to increase sales. In December, the company again cited logistical issues, this time China’s efforts to contain a Covid outbreak. If supply chain dominates earnings talk for the third time on Monday, few will be surprised. Covid cases have exploded in China and containment measures are threatening both garment manufacturing for export and domestic demand. Russia is another wild card; Nike joined other clothing companies in withdrawing from the country after its invasion of Ukraine. Nike executives confidently asserted that the worst of their supply chain problems were over and the market would recover this year. This prediction is starting to sound overly optimistic.

The turmoil is felt throughout the sneaker market. Nike’s sales are holding roughly where they were a year ago as the brand can’t keep up with demand for its products. Nike’s retail partners are paying an even higher price: the global sneaker shortage appears to be accelerating Nike’s withdrawal from the wholesale market. Foot Locker Shares fell more than 30% last month, when the US sneaker chain said no individual brand would account for more than 60% of sales this year (in 2020, Nike accounted for 75% of sales). And specialty stores that relied on limited-edition Nikes to draw crowds of sneakerheads say the drops are less and more between.

The essential : What’s happening in the sneaker market is a good example of how temporary supply chain issues can lead to permanent change. Nike is unlikely to return much of the market share it took from wholesalers.

Ralph Lauren puts on a show

  • Ralph Lauren will present its fall collection and Purple Label in New York on March 22
  • This will be the brand’s first in-person show in New York since 2019
  • In February, Ralph Lauren reported better-than-expected sales and raised its revenue outlook

Few brands are better at storytelling than Ralph Lauren (his recently announced collection inspired by early-to-mid-20th century fashion at HBCUs is the latest example). Fashion shows are a key part of maintaining this aura; the brand imagined from scratch French bistros and Prohibition-era nightclubs to provide the ideal setting for its clothes. This Tuesday’s show at the Museum of Modern Art, the first in-person since 2019, promises more of the same.

Theatrical presentations are part of a larger strategy that reflects Ralph Lauren’s market position. The brand, which is expected to exceed $6 billion in sales in its current fiscal year, spans virtually every price range and sales channel, from e-commerce to outlets in Alabama to a product lighthouse in Tokyo’s Omotesando shopping district. Outlets and department stores generate more sales than luxury flagships, especially in America. But shows like this week’s help cement the idea of ​​Ralph Lauren as a luxury brand in consumers’ minds, even if they buy a clearance polo shirt for $40 at Macy’s and not the $400 version. $ sold under the purple label.

The essential: This week’s show comes weeks after Axios announced that Ralph Lauren had been in talks with LVMH over a potential acquisition, although a deal appears unlikely at this time.

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