default-output-block.skip-main
BoF Logo

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.

Nike Hedges Its Bets

This week, everyone will be talking about Nike’s plans to sell both virtual and physical sneakers, plus the tail end of the all-important holiday shopping season.
Nike enters Roblox. Courtesy.
Nike enters Roblox. (Nike)

Nike Sprints Into the Metaverse

  • Nike reports second-quarter results on Dec. 20
  • The sneaker and activewear giant acquired the virtual sneaker seller RTFKT last week
  • Nike has struggled with supply chain problems stemming from Covid-related factory closures in Vietnam

Nike is running as fast as it can to ensure its sneakers are as ubiquitous in the metaverse as they are in real life. In the past month or so, the company has acquired RTFKT, a digital fashion start-up, built a Fortnite presence for its Jordan brand as well as a virtual theme park in online gaming platform Roblox. Engagement with its Snkrs e-commerce app is strong — part of a direct sales strategy that has given Nike cover to pull its shoes even from major US wholesalers like DSW. That said, virtual sneakers are more of a bet on the future than a boost to today’s bottom line. And they won’t solve Nike’s supply chain problems; most factories in Vietnam appear to have reopened after a wave of closures earlier this year, though the impact of those shutdowns, plus higher shipping and other logistics costs, will become apparent in Nike’s results this week.

The Bottom Line: Nike is hedging its bets by investing in both virtual and physical products; no matter which way the market heads, the world’s No. 1 sneaker brand is well-positioned to stay on top.

Beating the Christmas Rush

  • US retail sales for November came in below expectations, as inflation concerns weighed; the UK was a different story, with apparel sales exceeding 2019 levels for the first time
  • Forrester predicts US online holiday sales will approach $200 billion this year, up 43 percent from the same period in 2019
  • A longer window for holiday shopping, plus fewer discounts, could mitigate the impact of uneven consumer spending on retailers’ bottom lines

Retail sales haven’t been so merry this holiday season, though the official US government numbers may not tell the whole story. Well-publicised logistics problems convinced some shoppers to buy their gifts early, shifting spending outside the window normally used to gauge holiday sales. Higher prices, another factor experts say could explain weak November sales, also mean weakness in the top line won’t directly translate into a poor bottom line. That said, the next few weeks will be critical for the fashion industry, as the Omicron variant threatens to put a damper on the final holiday rush. That, plus the size of the usual wave of post-holiday returns, will determine how much extra inventory must be cleared to make way for spring collections. Cowen is predicting a rush of last-minute trips to the store in the US; the firm forecasts foot traffic will reach up to 85 percent of 2019 levels, which would be one of the best weeks for physical retail since the pandemic began.

The Bottom Line: Many brands hope to maintain price discipline into the new year, which will only be possible if store shelves and stockrooms aren’t cluttered with unsold Christmas jumpers.

Zegna Goes Public

  • Zegna, owner of the menswear luxury brand as well as Thom Browne, will go public via a special purpose acquisition company on Dec. 20
  • The luxury menswear label recently rebranded and is pivoting to emphasise “casual luxury” over workwear
  • Revenue dropped over 20 percent in 2020; the company projects €1.2 billion ($1.35 billion) in revenue this year, still down 8 percent from 2019

The Week Ahead jumped the gun in teasing Zegna’s IPO in last week’s edition. The following is a reprint of that item as the brand prepares to go public on Monday.

Fashion IPOs are red hot right now, though a 111-year-old, family owned Italian menswear label certainly stands out from the crowd of sans-serif-logoed DTC brands hitting the public market. Zegna is doing its best to show it can hang with the cool kids: a minimalist rebrand dropped the Ermenegildo, and its method of going public via a special purpose acquisition company is very 2021. But though Zegna’s outlook has certainly improved from its pandemic lows, the label is unlikely to attract attention from the sort of investors who snapped up shares in Allbirds or Warby Parker. Rather, Zegna executives are emphasising a path to growth that lies in clothes for outside the office, sold at luxury prices. The hundreds of millions of dollars Zegna expects to raise will help provide the funds needed to make the rebrand stick with consumers, while leaving the Zegna family with a controlling 62 percent stake.

The Bottom Line: “This transition to a casual luxury brand needs a lot of support,” chief executive Gildo Zegna told reporters when the SPAC deal was announced in July. Zegna will need every penny of the IPO proceeds, and potentially more, to compete in that arena, where the far larger LVMH, Kering, Chanel and Hermès dominate.

The Week Ahead wants to hear from you! Send tips, suggestions, complaints and compliments to brian.baskin@businessoffashion.com.

© 2021 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.
CONNECT WITH US ON
Voices2021
© 2021 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions and Privacy policy.
Voices2021