Venture: Sports and Trainers
Issue 127;
The fall of Nike has been well documented. It misread the trends that emerged during the pandemic, pulling out of physical retail stores and doubling down on direct-to-consumer sales on its own website. Their bet was that their brand was strong enough that people would skip the middleman and come straight to them, allowing them to retrieve the margin they were giving to the retailers.
However, “out of sight, out of mind” remained a valid principle, and the gaps on shelves were taken up by the likes of Hoka (owned by Deckers) and On Running, whose innovative designs were matched by event-winning performance. While Nike dominates the pro athlete endorsement space, these upstarts sponsored influencers instead. Much cheaper, but if well directed, just as powerful, and the last decade has seen them steadily gain market share.
While investors have pondered this battle between Nike and the American upstarts, an old Japanese brand has quietly stolen the show.
Asics Leads the Running Race
Asics has grown sales by 15-25% over the last five years, with gross margins rising from 46% to 56%, reflecting improved pricing power. Their success stems from focusing on running enthusiasts (the core customer Nike had been taking for granted) with genuine performance innovation, expanding into lifestyle fashion without diluting performance credibility, and maintaining disciplined operational excellence.
Now, the losers of the last five years are starting to fight back. Adidas is winning the advertising battle, Nike’s turnaround under an insider-CEO is showing promise, and Puma’s decline is abating. JD Sports, whose fortunes rely on the success of its brand suppliers, has traded with this losing group since 2022, despite also stocking Asics, On, and Hoka. As a group, they have all picked up in recent months, countering the bearish narrative around consumer weakness. It is a World Cup summer after all. Should these green shoots continue to grow, this would be an excellent entry point.
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