Strategic split
Why Tiger and Nike decided to part ways is somewhat unclear, although the fact that Woods is recovering from injuries after a life-threatening car crash, as well as the company shutting its golf equipment division in 2016, go some way in explaining the decision. Whatever the exact reason, the split comes at a more-difficult-than-usual time for the company, with Nike at something of a strategic crossroads.
Indeed, Nike has been struggling in recent times, with the company’s stock falling in consecutive years for the first time in history — a shock to the system for investors who’ve become used to impressive annual returns year after year. Just 3 weeks ago, the company announced it expected annual sales to grow a sluggish 1%, sending Nike stock tumbling. Execs pointed to the strong US dollar and weaker consumer demand over the holiday season to explain the latest quarter, as well as “macro” headwinds, digital traffic “softness”, marketplace promotions, and “life cycle management of key product franchises”.
In reality, this list of corporate jargon somewhat glosses over the truth of Nike’s current predicament: that there’s new, very serious, and well-backed competition on the starting block. Brands like Hoka, On Running, and a host of domestic competitors in China, are starting to slow the company’s growth. As Nike pursues $2 billion in cost cuts — while continuing to grow its lifestyle and fashion lines and execute a decades-long direct-to-consumer strategy — it runs the risk of jeopardizing or diluting its dominant position in sports. That’s a delicate balancing act, even for the master marketers at Nike.
However, even if the short-term feels a little more difficult, Nike execs can rest easy that the next generation of major consumers already love the brand — which, in long-term returns, might just do it.
