The Downfall of Nike EXPLAINED

Welcome to WatchMojo, and today we're exploring how Nike lost its stride, and what it'll take to get it back.

In 1964, runner Phil Knight and coach Bill Bowerman founded Blue Ribbon Sports, initially selling Japanese running shoes. The business became Nike in 1971, with Bowerman's experiments with a waffle iron helping develop its early running footwear.

Nike then learned to turn performance into aspiration. Michael Jordan's 1984 signing connected basketball, celebrity, and streetwear. “Just Do It,” introduced in 1988, gave the brand an attitude beyond any particular shoe.

Fashion wasn't a recent distraction from Nike's sporting roots. Combining sport and culture made the company dominant. Its success depended on giving people products they wanted, and reasons to want them. The retail network helped turn that desire into IRL purchases, putting Nike wherever customers were already shopping.

Nike’s increasing desire to own that relationship changed things.

Wholesale retailers took a cut of sales and controlled part of the shopping experience. Nike's stores, website, and apps promised customer data, greater control, and potentially better margins. Selling directly could make an already powerful brand more profitable.

The shift began before John Donahoe became CEO in 2020. Under the former eBay chief, it ramped up. His technology background suited the ambition: that of building memberships and bringing customers into Nike's channels.

But footwear isn't bought entirely on a screen.

Imagine entering a running store planning to buy Nike. A salesperson brings out Hoka, On, and Brooks. You compare cushioning, fit, and support, then leave with a brand you'd barely considered.

That retailer has processed a sale, sure—but it's also helped determine which company gets it.

By pulling back from some wholesale relationships, Nike reduced its shelf presence. Retailers had space to fill and competitors ready to fill it. Nike was betting enough shoppers would follow it directly to outweigh those lost opportunities.

When demand cooled, that bet became harder to back. Nike had weakened relationships with businesses that could help sell its products, while alternatives were winning customers.

Direct sales also carried costs: stores, digital infrastructure, and online marketing. Better margins weren't a given.

The wholesale retreat, in turn, amplified other weaknesses. Less exciting products became harder to sell through a retail network Nike had deliberately deemphasized.

Before we continue, what's earned a place in your sneaker rotation? Scan the QR code to join our WatchMojo Pop Culture Livestream for more conversation.

Nike was leaning heavily on Air Force 1s, Dunks, and Jordans. Those were valuable franchises, but endless colorways couldn't keep recreating the excitement of a coveted release.

Greater availability weakened scarcity. Excess inventory needed discounts, and repeated promotions gave shoppers a reason to wait rather than pay full price.

This wasn't just sneaker psychology. By May 2025, Nike was planning price increases on selected products, even as discounting and aging inventory were already squeezing its margins.

Meanwhile, rivals offered compelling alternatives in running, the category Nike was built on. Hoka paired distinctive silhouettes with generous cushioning. On combined performance with recognizable design. Their shoes were desirable without carrying a Swoosh.

Hoka's sales rose nearly 16% in fiscal 2026; On's grew 30% in 2025. Those figures don't establish how much business came from Nike, but they do show its competitors gaining momentum.

Nike, meanwhile, hadn't stopped innovating. Its carbon-plated running shoes demonstrated real technological progress. The challenge was consistently delivering exciting products, while managing classics that had become overexposed. That challenge grew harder as rivals gained room on retailers' shelves.

China complicated the comeback. Nike faced a difficult spending environment and increasingly credible domestic competitors, including Anta and Li-Ning. Stronger interest in Chinese brands also challenged the assumption that Western branding would keep winning customers.

Nike's Greater China footwear revenue fell 13% in fiscal 2026, while regional earnings before interest and taxes dropped 20%.

Elsewhere in the portfolio, Nike-owned Converse saw annual revenue fall 31 percent, demonstrating the weakness extended beyond one Nike sneaker franchise.

Nike's cultural positioning also drew criticism online. Its Colin Kaepernick campaign prompted boycott calls. Plus-size and para-sport mannequins at its London flagship in 2019 won praise for inclusion—and backlash over body positivity. In 2023, transgender influencer Dylan Mulvaney promoted Nike leggings and a sports bra in sponsored posts, triggering more boycott calls. Its diversity policies also faced federal scrutiny.

Those controversies may have alienated some customers. But they don't establish the scale of any sales impact. It can be tempting to make politics the main explanation… but that overlooks the distribution, product, and execution decisions we can tangibly work with and analyze.

Longtime Nike executive Elliott Hill became CEO in 2024, emphasizing product innovation and stronger retail relationships.

John Donahoe, Hill’s predecessor, emphasized digital transformation and direct customer relationships. Hill's reset put renewed emphasis on sporting products and the wider retail marketplace, with partners helping reach shoppers Nike can't automatically pull into its own channels.

In fiscal 2026, wholesale revenue rose 6% while Nike Direct fell 6%. In the fourth quarter, wholesale rose 4% and Direct declined 7%.

As such, getting shelf space back takes more than reopening an account. Retailers now have profitable alternatives, and Nike needs products that justify giving it more room.

That isn’t to say that there aren’t encouraging releases: the Vomero 18 reached about $100 million in sales in its first three months. But the repair has been costly. Nike announced approximately 1,400 global operations job cuts in April 2026, mostly affecting technology roles.

Spectacular fourth-quarter profit growth didn’t establish a recovery, either. An expected tariff refund substantially boosted earnings—which wasn't evidence of shoppers suddenly returning.