Nike's Eyes Bigger Than Its Stomach? Susquehanna Downgrades

Nike Inc NKE's pull model of keeping supply below demand has all but disappeared and it appears that adidas AG (ADR) ADDYY has successfully stolen it away.

There is now an oversupply of basketball products in North America, which will continue to pressure sales and margins according to Susquehanna analyst Sam Poser. Surprisingly, Adidas is now growing its basketball business at a rapid pace.

“Nike appears to misjudged the appetite for some key marquee basketball product which has resulted in creating a push model versus the expected pull model,” said Poser.

The analyst noted that Nike miscalculated on several basketball releases, which is taking the shine of all but the very best Nike and Jordan releases.

At the end of the fourth quarter in 2017, Susquehanna admitted they saw Nike turning the corner based on signs of improvement in basketball but has since changed its stance based on commentary from Nike’s largest wholesale accounts.

While Nike basketball certainly isn’t dead, given the amount of signature basketball shoes that remain present at factory outlets, the category may take longer than initially anticipated as excess inventory is cleared. Nike misjudgment of signature shoe releases has left them in an excess inventory glut. If there was an appetite for 500,000 pairs of a certain launch, Nike shipped 700,000, according to Susquehanna.

Amid, Nike Basketball struggles and a lack of innovation beyond the VaporMax, Susquehanna has downgraded Nike from Positive to Neutral and lowered its price target from $64 to $54.

Nike can at least rest its head on the solace that it still has the best selling shoe in America, the Tanjun.

Related Link: Adidas Jumps Over Jordan Brand To Take The No. 2 Spot In Sports Footwear