FEW companies benefitted from government largesse during the pandemic era more than Nike. Stuck at home and with little else to spend their trillions of dollars in stimulus money on, consumers could not get enough of what the athletic-gear maker was selling. In 2020, Air Jordan 1 Highs were going for a 61 per cent premium on the resale market. Nike’s share price soared 40 per cent in 2020 and as much as 25.5 per cent 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 per cent 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 is sitting on US$8.5 billion of unsold goods despite a slew of margin-busting promotions, a level some 23 per cent 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 per cent discount. This leads to an uncomfortable question: is the US$152 billion global “sneaker bubble” bursting? The answer, at least for Nike, may be “yes”.

“Overall, Nike is a solid brand, and it is not suffering from an existential crisis,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients. “However, it isn’t on the front foot either, and has to accept that the year ahead will be one of resetting, retrenching, and reformulating the way it does business.”