Nike Air Jordan resale value falls; Is sneaker culture moving on? 

In anticipation of Nike's upcoming report on its back-to-school season performance, investors are closely monitoring the performance of its Jordan brand, a significant profit driver for the company.

According to data from Altan Insights, the resale value of certain Jordan shoes has been declining, while other sneaker brands like On Running have been experiencing substantial growth. On the StockX resale platform, the premium paid for new releases of Nike's Air Jordan 1 Retro High, a coveted collector's shoe, has dropped from a peak of 61 per cent in 2020 to just 4 per cent in 2023. Some Jordan high-top models, including "True Blue," "Skyline," and "White Cement," have even been selling at a discount this year.

Investor concerns 

This decline in resale value has raised concerns among investors that the Jordan brand, which is a significant revenue source for Nike, may be losing its appeal. While Nike CEO John Donahoe stated in June that Jordan was on track to become the second-largest footwear brand in North America, some analysts are now questioning this trajectory.

Although Nike does not disclose the exact percentage of its total revenues generated by the Jordan brand, within its wholesale segment, Jordan accounts for approximately 16 per cent of Nike's revenues, as reported in its fiscal 2023 annual report.

Nike is set to report its results for the first quarter of the 2024 fiscal year, which is expected to fall below Wall Street's expectations, mainly due to reduced consumer spending on discretionary items like footwear and apparel in North America.

Rising competition 

While sales on StockX do not directly impact Nike's revenues, they serve as a barometer for consumer sentiment towards the brand and the overall demand for discretionary goods. While Nike remains among the top five best-selling sneaker brands on StockX, other companies such as Asics and Salomon have been recording faster year-over-year sales growth on the platform.

The shift in consumer preference towards performance running shoes has contributed to the decline in demand for lifestyle sneakers, which include classic Air Jordan 1 high-tops. Notably, sales of performance shoes from Nike's Jordan brand have outpaced retro styles.

As resale premiums for Nike products have decreased, Nike's growth has also slowed down. In the key North American market, sales increased by just 5 per cent in the fourth quarter ending May 31, marking the slowest growth in four quarters.

Additionally, data from Barclays' Apptopia showed a decline in Nike app downloads and daily average users during the fiscal first quarter, suggesting a shift in consumer behaviour.

Some investors are concerned that Nike's innovation has not kept pace with newer brands in the US market, particularly in the running shoe category, where competition has intensified.

Nike CEO Donahoe indicated in June that the company was focused on revitalising its running business with updates to existing styles, such as its Infinity road running shoes and Pegasus trail running shoes.

As the sneaker market evolves and consumer preferences change, Nike faces the challenge of maintaining its dominance and adapting to shifting trends in the industry.

(With Reuters Inputs)