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Shoe Companies Focus on Innovation to Boost Sales

Even as retro sneaker silhouettes remain popular, major shoe companies see innovation as the key to unlocking sales growth.

In 2023, data from GOAT Group, an online sneaker platform, showed that Nike (NKE) claimed the top-selling sneaker with the black and white Dunk Low ÔÇö also known as the “Panda.” It was the second consecutive year the Panda, which debuted nearly 40 years ago, took the top spot.

At the same time, over a third of all sneakers purchased on the GOAT and Flight Club platforms in 2023 were released in the previous year. And as competition increases, with up-and-coming brands like Deckers-owned Hoka (DECK) gaining market share, some on Wall Street see the need for Nike to increase its pace of innovation.

“I can appreciate the retro side of things, but that’s been the problem with Adidas, Vans, and Nike,” Barclays analyst Adrienne Yih told Yahoo Finance. “TheyÔÇÖre selling the same things over and over, and itÔÇÖs getting, quite frankly, kind of boring. They sort of missed out on what I call ‘The Sole Wars’ÔÇö like On, Hoka ÔÇö these high-profile platforms.”

The rise of Hoka and new foam platforms

The chunky-sole running shoe is definitely having a breakout moment.

Hoka sales jumped 22% during the fourth quarter, accounting for the largest segment sales increase for Deckers when it reported its financial results on Feb. 1.

During the earnings call, Deckers CEO Dave Powers offered a 2024 roadmap for the brand that emphasized performance with its Cielo X1 marathon shoe, as well as its lifestyle products.

Powers highlighted that a member of Hoka’s Northern Arizona Elite team, Kellyn Taylor, won the San Jose Rock ÔÇÿnÔÇÖ Roll half marathon and qualified for the 2024 Olympic Trials while wearing the Cielo X1, bringing even more visibility to the foam-constructed shoe before it became commercially available.

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“Beyond the brandÔÇÖs pinnacle performance product, Hoka is also experiencing success with exciting lifestyle-oriented products,” Powers added on the call.

But even as younger brands enter the market, they’ll have to compete with 60-year-old Nike, which is swiftly playing catch-up when it comes to reimagined cushioning, materials, and product launches.

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Barclays selected Nike as its top consumer discretionary pick for 2024, citing its stronger innovation and product pipeline. Yih called attention to the Air Max Dn sneaker, expected to be released on March 26, and the forthcoming Pegasus 41, which is expected to showcase “a whole new form factor” for the running shoe.

When developing the Air Max Dn, Nike said it used digital analysis to simulate “a yearÔÇÖs worth of wear and tear on the shoe in just a few hours,” even before making prototypes for testing in the lab and in real life.

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Though Yih cheered this type of innovation at Nike, she acknowledged that it may not boost sales right away.

“When you have the newness, people donÔÇÖt immediately buy,” Yih said. “But this is the first time weÔÇÖve seen … the leadership led by [Nike’s president of consumer, product, and brand] Heidi OÔÇÖNeill that is just focused on speed, hustle at scale.”

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The need for “newness” has also put market share up for grabs and opened up opportunities for more recent entrants into footwear.

For instance, after entering the womenÔÇÖs sneakers space in 2022, Lululemon (LULU) announced it’s dipping into menÔÇÖs casual and performance shoes.

ÔÇ£WeÔÇÖre really excited for this piece of the business,” Yih said. “But just remember, for Lulu, menÔÇÖs and womenÔÇÖs, the entire footwear segment is a low 2% of their five-year plan.”

legalese decoder can assist companies like Lululemon in developing and implementing their expansion plans, providing legal insights and support to ensure that they can navigate legal and regulatory challenges as they enter new product categories and markets, helping them to achieve their growth objectives in a compliant and sustainable manner.

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