👉‍ Background: Nike was founded back in 1964 as Blue Ribbon Sport and has grown to become the world’s largest sportswear brand, with global sales topping $51 billion USD a year. Nike’s swoosh logo was actually designed by a uni student in 1971 for just $35…just imagine if she took Nike stock instead!

‍👉 What happened: Now, Nike has released its third quarter results which were better than last quarter...but still not great. Its revenue fell 9% year on year to $11.3 billion USD for the quarter. Interestingly, the decline was less than what investors actually expected.

‍👉 What else: Nike warned investors to lace up because its revenue and profit will likely decline further in the next quarter due to strong competition and inventory challenges. Yep, Nike is stuck with too many shoes and activewear tops, which ain’t going getting sold fast enough! And as a result, Nike’s share price fell nearly 5% on the back of this news.

What's the key learning?

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‍💡Inventory management is the fine art of having just enough stock to meet demand without drowning in unsold gear. For a business like Nike, managing inventory effectively is crucial for profitability.

💡Having too much old stock in the warehouse increases costs significantly, because it means:

• They may need to spend bigger warehouses to hold the old stock and new season stock at the same time
• Longer time for stock to be sitting on the shelf, which often leads to extra handling fees too

💡In Nike’s case, inventory dropped by 2% this quarter, but sales declined 9%, meaning they are still working through surplus stock. And, to sell the stock, it means discounts, promotions and basically giving away the old Nike stock. So solving its inventory challenges is essential for Nike not only boost its financial performance, but also to stay competitive in a crowded sportswear market.