Jim Cramer Warns Nike: Hoka's Market Share Surge Poses Serious Competition

Jim Cramer highlights Hoka's rise as a formidable competitor to Nike in the running shoe market.

Sunday, May 26, 2024 2:24 PM UTC

According to CNBC, Jim Cramer, a financial expert, has recently expressed concern regarding the formidable competition that Hoka running shoes may present for Nike. Deckers Outdoor, the proprietors of the Hoka and UGG brands, is positioning itself to challenge Nike's market dominance as it gains market share. Given Hoka's increasing success, Nike must reevaluate its approach to maintain a competitive edge in the sports footwear sector.

The subject of innovation is prominent in the performance running shoe industry, particularly when considering Nike. In recent months, the company has faced significant scrutiny from analysts and the general public due to its mediocre product pipeline.

Hoka's Growth Fueled by Innovation and Diverse Offerings, Says Deckers CEO Dave Powers

Dave Powers, chief executive officer of Deckers, does not mind this regarding the company's flagship brand, Hoka. Undoubtedly, Hoka is propelling expansion and attracting new customers on the product front by introducing novel revisions and new offerings across a wide range of footwear.

Hoka's fiscal year 2024 performance was primarily driven by road running favorites such as the Clifton and Bondi franchises, stability staples such as the Arahi and Gaviota, both of which received updates throughout the year, trail conquerors such as the Speedgoat, Challenger, and Stinson franchises, and everyday performance lifestyle shoes such as the Transport, Solimar, and the Kawana, according to Powers (via Footwear News), who stated this to analysts on the company's fourth-quarter earnings call on May 23.

"We expect these styles will continue to contribute to the growth of Hoka moving forward but are also really excited about the brand's ongoing efforts to constantly infuse new innovations into the product assortment," Powers said.

"Innovation is the Hoka brand's top priority, continuing to develop groundbreaking products that energize consumers worldwide," the soon-to-be-retired CEO continued. "We are fortunate to have a phenomenal roster of Hoka athletes, with whom we will continue partnering to drive more excellent athlete-enhanced innovations into our most pinnacle products while further developing the assortment to segment and differentiate Hoka distribution as we continue to scale. The recently launched Skyward X is the perfect example of new product innovation that benefits our segmentation efforts. This all-new style was developed as our first carbon-plated shoe designed for everyday runs with maximum cushioning.”

Powers stated that the organization is "systematically" expanding Hoka's distribution over the following year. "We intend to expand our distribution selectively with key partners while monitoring the productivity of those doors closely," he explained.

This occurs as Deckers reported record-breaking net sales of $4.288 billion for the fiscal year 2024, an increase of 18.2 percent from the previous year. Hoka disclosed that the brand's net sales increased by 27.9 percent to $1,807 billion in fiscal year 2024 from $1,413 billion in fiscal year 2023.

Deckers is optimistic that Hoka will remain the business's primary growth driver through fiscal year 2025. The organization anticipates a 20 percent growth in Hoka's net sales compared to fiscal 2024. This is attributed to consumer acquisition and retention improvements in the direct-to-consumer channel, strategic partnerships for channel expansion, disciplined marketplace management, and a steadfast commitment to expanding international awareness and market share.

Deckers anticipates a ten percent increase in net sales to $4.7 billion for the fiscal year 2025. Diluted earnings per share are projected to range between $29.50 and $30.00.

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