The Kicks You Wear, Vol. 248 — 😬 The small downside to DTC

The latest earnings call wasn't the prettiest for Nike

Sep 30, 2022

Goooood morning, family. Welcome back to the Kicks You Wear. Thank you so much for rocking with me today. I appreciate you.

Prayers up for everybody down in the southeast experiencing Hurricane Ian. Sending my love to you. I hope you’re staying safe. If there are any resources for aid I should be sharing with people here feel free to send them my way at mikedsykes@gmail.com. I’ll compile them and share it with the group.

Let’s jump in.

The backend

Nike LED signage — *Photo by Nelson Ndongala on Unsplash*

For the first time in a long time, it feels like Nike’s direct-to-consumer strategy has a slight downside. At least in the short term.

What happened: The Swoosh held its quarterly earnings call for investors Thursday evening and the news wasn’t the rosiest.

It has way too much product right now. Inventory is up 44%. That’s why we’re seeing lots of discounts and late arrivals for certain models.
Because of those discounts, Nike’s gross margins — which is the difference between a company’s revenue and the cost of goods sold — dipped to 44.3%.

Translation: Nike has waaaay more inventory than it’s had in a while. And it’s trying to get off of it by giving us discounts on stuff that would’ve been fast sellers just six months ago.

The reason: Nike says it’s the supply chain. They’re still reeling from the effects of longer shipping times and rising shipping costs for their products.

On top of that, consumers are still less willing to spend discretionary income on things like sneakers and clothing because of inflation.

Supply chain relief is coming. The Supply Chain Pressure Index dipped again for the 4th month in a row in August.

There’s an argument to be made that this would be less of a problem if Nike didn’t lean so hard into DTC.

Nike surrendered extra shelf space with wholesalers like Foot Locker to lean into selling its goods direct to consumer. That means less vendors available to take in stock.
And because they’re shipping to fewer wholesalers, it’s more likely that merchandise being shipped can get stuck or arrive too late as older goods sit.

It’s a delicate dance Nike is performing here. It shows us the benefits and drawbacks of a direct-to-consumer strategy.

To be clear: Nike is still a corporate mega machine making lots of money. Revenue bumped up by 4% to $12.69 billion. And this doens’t mean DTC isn’t beneficial to Nike. There’s more money for them to make by cutting the middle man out.

Their digital sales also rose by 16% with Nike Direct sales jumping up by 8%.

But…going it alone as the company is gives them less of a crutch to lean on when infrastructure starts collapsing. We’re seeing the effects of that in real time.

CPFM is collabing with…McDonald’s???

Who had McDonalds collabing with Cactus Plant Flea Market? Certainly not me.

But it’s happening: CPFM is dropping an adult Happy Meal box with toys at McDonalds.

No, not those toys. Get your mind out the gutter.

Details:

The meal comes in a traditional Happy Meal box with a CPFM design. Inside the box are collectible Mickey D’s mascots like Grimace and Hamburglar.
To get the box you have to order from the app from October 3 thru 30. If you do, you’re automatically entered to win McDonald’s x CPFM merch which…yay?

A look:

SAINT @saint

First Look: Cactus Plant Flea Market x McDonald’s Box 🍔 🎥 @mnmtwinz

The why: Same vibe as the Travis Scott meal. They want a younger audience — looking at you, Gen Z and Millennials. To get us they’re combining nostalgia and streetwear. This is basically our cryptonite.

This all feels so weird. For so long, streetwear was anti. Wearing it made you a deviant. You railed against society with the clothes you wore.

Now, apparently, it’s corporate. Go figure.

I don’t know who needs to hear this, but….

You probably shouldn’t sell stolen goods online. I mean, really, you shouldn’t steal. But if you do steal? Don’t take what you stole and post it on the internet for everyone to see it. The folks who ransacked Nike's caravan a few weeks ago apparently didn’t catch the memo.

What’s happening: Now StockX is taking back payments from seller accounts for the Cherry Red Jordan 11’s stolen from Nike’s container yard in Memphis a few weeks ago, per Chris Burns.

Chris Burns @archbyccb

StockX has begun withdrawing payouts from seller accounts that sold the Air Jordan 11 retros stolen from the container yard in Memphis. Shoes, "violate the StockX Terms & Conditions of Use. The item in question will be provided to law enforcement or destroyed."

And, I mean, of course, they are. What are they going to do? Not cooperate with the police? Come on. That’s just common sense.

Don’t steal. And if you’re going to steal? Please don’t be this silly.

My Obsession: Gorpcoring for Fall

I know you supposed to wait until the wintertime to start #dressin, but these fall flavors are going to get the best of me.

Y’all know summer is my season. But this Gorpcore vibe? It’s for me. I need to hit the trail soon. I’ve already got the kicks lined up — two pairs of YURT 574s and Sean Wotherspoon’s Superturf are holding me down.

What I’ve been looking into, though, is getting the right gear.

For the most part, I’ve been looking at Superdry which I absolutely love. The Americana-Japanese fusion gets me every time.
Patagonia is another obvious spot, but I feel like I break the bank with them every time.

So I’m looking for good (non-North Face/Columbia/etc) recs on outdoor wear. Let me know if you have any! Also, if you live in the DMV, do you have any favorite trails? Don’t say Great Falls.