2 min read

Glasses on the run Newsletter #53

DALL·E A board with someone's marathon training progress. Gen AI struggling with images with text.
DALL·E A board with someone's marathon training progress. Gen AI struggling with images with text.

Hi,

I hope you are all well.

What was interesting in the business of running

Is Nike's direct-to-consumer (DTC) strategy falling apart? Nike reported financial results for its fiscal 2024 fourth quarter as well as full year, both of which ended on 31st May 2024. While its annual sales grew slightly from $51.2 billion to $51.4 billion, its fourth quarter total revenue was down 2% to $12.6 billion. More interestingly, Nike Direct sales were down 8% for the fourth quarter. That is very significant as Nike Direct has been at the core of Nike's growth strategy over the last few years. Earlier this year Nike CEO John Donahoe acknowledged that the company "must lean in with our wholesale partners" and that 8% drop may be another sign that Nike Direct may be reaching its limits. For the fourth quarter it generated 40.4% of the company's total revenue (FT, Nike).

Here is a comparison with two of Nike's competitors. On Running is a younger company and brand, founded in 2010. For its first fiscal 2024 quarter that ended on 31st March, On reported record sales of CHF 508.2 million, growing 20.9% year-on-year. Its DTC business grew 39% for the period, and currently stands at 37.5% of On's total sales (On).

Asics, on the other hand, is actually older than Nike and a well-established brand. Its first quarter for the fiscal 2024 also ended on 31st March. For that period Asics reported total sales of Yen 174.1 billion, growing 14.3% year-on-year. Its DTC business grew 30.9% and currently makes up 34.4% of Asics's total revenue (Asics).

So, while Nike's share of DTC as part of the total is higher than both that of On and that of Asics, it is not that far off and the very high DTC growth rates for both On and Asics make it difficult to attribute Nike's results to some wider market forces. Furthermore, Nike cuts its full-year guidance and expects its downward trend to continue (CNBC).

Strava, in the meantime, continues its active product development. First, it is shutting down Fatmap - a 3D mapping platform that it acquired just 20 months ago (TechCrunch). It is also launching a family plan for subscribers. In the US it is going to cost $140 annually as compared to $80 annually for the individual subscription (Strava, Engadget)

Finally, Mizuno has created infrared camera blocking outfits for (at least some of) the Japan Olympic athletes (The Verge). And Asics launched the second iteration of its Superblast shoe. Reviews by Tom's Guide and Believe in the Run.

Thank you for reading,

Momchil