The world’s most prominent sports brands have reported a considerable drop in consumer spending during a challenging financial period in the U.S.
Brands, including Adidas, Puma, and Nike, are already struggling to reach projected figures for 2024 as consumers hit the brakes on spending.
Shoe Companies Forced to Lower Expectations
After a successful 2023, many of America’s largest apparel brands predicted the new year would garner the same results.
Yet, less than two months into 2024, companies including Nike, Puma, and Adidas have all lowered their sales growth expectations for the following year after witnessing a considerable drop in consumer spending.
Analysts Predict Drop in Consumer Spending for 2024
Financial analysts predicted a reduction in consumer spending towards the end of 2023.
A survey carried out by Bloomberg back in September led analysts to believe this would partly result from consumers with student loan debts being forced to reduce their spending in 2024.
Footwear and Accessories Set to Take a Hit
Randal Konik, an analyst from Bloomberg, predicted a drastic reduction in spending after over 90% of the people in a survey claimed they’re worried about being able to pay for monthly essentials, including rent.
“Apparel, footwear, accessories, restaurants, and big-ticket items are likely to see the biggest pullbacks in spending,” he wrote.
Plans to Cut Costs
Right at the tail end of 2023, Nike announced their plan to cut supplies of numerous product lines, improve the company’s supply chain, and condense management positions to save $2 billion over three years.
In the wake of the announcement, the apparel giant’s stock price fell about 11%.
Less Consumer Spending Becomes Reality
Two months into the new year, it appears the predictions made by analysts such as Konik have become a reality.
One of Nike’s greatest competitors, Adidas, reported a 9% drop in its share price at the beginning of February.
Mid-Single-Digit Sales Growth
Just before the share price dropped, Adidas announced it would not reach the analysts’ initial predictions for sales growth in 2024.
The company revealed they are now aiming for around a 4-5% growth in sales instead of the 9% initially predicted.
Adidas CEO Lacks Hope for 2024
During an interview, Adidas CEO Bjorn Gulden shared his opinion on the reduced growth expectations of 2024.
Regarding the company’s current financial performance in 2024, Gulden admitted it was “not good.”
Consumers Around the World Are Spending Less
Later in the statement, Gulden spoke about consumer spending.
“Consumer sentiment around the world is, of course, not great. It’s not like people are lining up everywhere to buy product,” Gulden said.
Taking a Break from Spending During Difficult Period
Speaking in an interview with Reuters, Monique Pollard, an analyst from Citi, explained there are several reasons behind the reduction in consumer spending.
With layoffs at some of America’s largest tech companies, persistent inflation, and a reduction in pay raises, amongst other concerns, Pollard argues it makes sense that consumers are spending less.
Making the Dollars Stretch Further
Pollard also noticed a trend of Americans trying to make their paycheck last longer, ultimately negatively affecting fashion and apparel brands.
According to Pollard, “It does suggest that consumers are a bit more focused on getting value for money.”
Trend Noticed in Other Industries
A reduction in sales growth for 2024 will likely spread to other industries, such as streaming. While Netflix finished 2023 with impressive growth, its competitors weren’t as lucky.
If Americans continue to feel like they have less money to spend, companies may begin to experience cross-industry competition. Consumers may begin to contemplate spending money on a new pair of shoes from Nike instead of a month’s membership with Netflix or vice-versa.
