The Sneaker Bubble Is Bursting Around Nike

Few companies benefited from government largesse during the pandemic era more than Nike Inc. Stuck at home and with little else to spend their trillions of dollars in stimulus money on, consumers couldn’t get enough of what the athletic-gear maker was selling. In 2020, Air Jordan 1 Highs were going for a 61% premium on the resale market. Nike’s share price soared 40% in 2020 and as much as 25.5% in 2021, reaching a record high that November. Just four Wall Street analysts out of the more than 30 that covered Nike at the time had recommended investors “hold” the shares, which is often interpreted as a recommendation to sell.

Those heady days are long gone. Nike’s shares have tumbled 37% from their peak. The number of analysts with a “hold” rating on the stock has tripled to 12. In its fiscal 2023 earnings report last week, the company divulged that it’s sitting on $8.5 billion of unsold goods despite a slew of margin-busting promotions, a level some 23% above what it described as healthy inventory levels in 2021. Its outlook for sales in fiscal 2024 fell short of analysts’ estimates. Those Air Jordan 1 Highs? They are now selling in the resale market at a 2% discount. This leads to an uncomfortable question: is the $152 billion global “sneaker bubble” bursting? The answer, at least for Nike, may be yes.