Nike’s biggest threat is coming from young brands like Hoka and On Running

• Emerging brands like Hoka and On are beginning to compete against sneaker giant Nike.
• Analysts say they’re concerned Nike’s over-distribution is leading to “lifestyle sneaker fatigue.” 
• In four years, Hoka and On spent the equivalent of what Nike spends in two weeks.

Sneaker giant Nike needs to revamp to keep up with the young brands threatening to steal its market share.

That’s according to analysts at TD Cowen, who said in a Friday note that there is an “unchecked competitive environment” happening in the sportswear space, namely from emerging brands that are spending less money than the legacy brand but still managing to eat away at the company’s market share. 

Over four years, emerging sportswear companies Hoka and On Running spent the equivalent of what Nike spends in two weeks to grow their market shares — and added $3 billion worth of revenue over that period, according to TD Cowen.

“Nike’s product innovation, marketing, and demand creation need to find a balance between its dominant position in global sports and its transition to lifestyle/streetwear,” they said. 

Nike President and CEO John Donahoe told investors last week after the company released its fourth-quarter earnings that it is prioritizing newness and consistency in its offerings.

“Running has been a competitive battlefield lately with more and more brands joining the market,” Donahoe said, but Nike saw 10% growth for its running footwear business over the past year, he added.

TD Cowen analysts said that the company’s over-distribution in the wholesale market, meaning sales to department stores and shops like Designer Brands, Macy’s, and Foot Locker who then sell Nike products to consumers at brick-and-mortar locations, is also “prompting lifestyle sneaker fatigue” among consumers who already have more than enough Nike shoes sitting at home.

Earlier this year, Nike announced it would be returning its products to Macy’s after previously pulling the plug on its partnership with the department chain in 2021 to focus on selling to customers through its Nike stores and website. 

The push for innovation at Nike isn’t new. In May, the company changed up its executive suite in a move to pursue its “commitment to product innovation.” Analysts have been pushing the company to revamp its “stale” offerings for some time now.

“There is no newness coming out of Nike,” Sam Poser, an analyst at Williams Trading said earlier this year.