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· Posted on
February 21, 2024

Just Discount It: Nike clears out its closet to reduce its $10 billion of inventory

After some hefty discounting, Nike has managed to clear a lot of its inventory.

What's the key learning?

  • Nike manufactured billions of dollars worth of products during COVID, but things didn't go well when consumer sentiment softened in the US and China.
  • Inventory management quietly drives profits when managed well, or loudly leads to losses when it is mismanaged.
  • Nike's finally getting things back into a better balance between supply and demand.

👉 Background: Nike, formerly known as 'Blue Ribbon Sports', has become the GOAT of all sportswear - think: Air Jordans, Vaporfly and Nike SB.

👉 What happened: During COVID, Nike got pretty excited by the prospects of rapid growth - so they manufactured billions of dollars worth of products. But when consumer sentiment softened in the US and China, Nike was left holding the bag - nearly $10 billion USD worth of inventory stuck in the warehouses.

👉 What else: But now, after some hefty discounting, Nike has managed to clear a lot of the inventory.

What's the key learning?

💡Inventory management is the unsung hero of retail. It quietly drives profits when managed well, or loudly leads to losses when it is mismanaged.

💡And poor inventory management can be veeery costly:

  • It increases storage costs.
  • It ties up capital in stock that's getting dusty on the warehouse shelves.
  • It forces companies to discount their products to clear the stock.

💡But it seems like Nike's finally getting things back into a better balance between supply and demand. And investors clearly liked this too - with the Nike share price jumping by 11% after the news.

‍

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