Why has Nike lost its shine?

World Business Report

This episode examines three major economic and business developments: the G7's coordinated release of strategic fuel reserves to curb surging diesel prices amid geopolitical tensions;

Key takeaways

• G7 countries agreed to release 100 million barrels of crude oil and diesel from strategic stockpiles over four months to stabilize markets after US export ban threats.
• US employers added only 29,000 jobs in September with unemployment rising to 4.2%, leading analysts to expect the Federal Reserve to pause interest rate hikes.
• Nike reported earnings that missed analyst expectations and announced job cuts while losing football star Killian Mbappe to rival brand On.
• Industry experts note Nike's China slump is largely self-inflicted, as constant flash sales on Tmall, JD.com, and WeChat have trained consumers to view the brand as a discount retailer.
• Domestic sportswear brands like Anta and Lining are rapidly gaining market share in China by upgrading product quality and securing marquee athlete deals such as Steph Curry with Lining.

Main topics

• G7 strategic fuel reserve release
• US labor market slowdown and Fed policy
• Nike's China sales slump and distribution strategy

Notable quotes

"This joint decision and this unity should bring prices down."

Conclusion

Listeners gain a clear understanding of how geopolitical supply shocks

Transcript preview

Speaker 1 (0:00) This BBC podcast is supported by ads outside the UK. Speaker 8 (0:05) Would you ever move to a tiny remote island with only three other inhabitants? The BBC's Georgina Ranard and her partner are swapping city life for baby lambs on this Welsh island. Sometimes parts of the island are covered by waves. So what's it like living without any shops, a gym or even cars? I'm Hannah Gelbart. Come join us on What In The World, an award-winning daily podcast from the BBC World Service. You can listen wherever you get your BBC podcasts. Speaker 6 (0:36) So, quick summer recap? Speaker 1 (0:38) Heat waves, data leaks, AI hacks, folding phones, and a viral, spinally challenged raccoon. Yeah, Speaker 6 (0:43) I think that covers it, right? I'm Thomas Germain. I'm Speaker 1 (0:47) Jess Maddox, and The Interface is back from its summer break. Speaker 6 (0:49) New season, new co-host, same deep dives into the tech that's shaping our world and our lives. Speaker 1 (0:56) So before AI wipes out all of humanity, Speaker 6 (0:58) allegedly, join Speaker 1 (1:00) us for The Interface. Speaker 6 (1:01) Listen on BBC.com or wherever you get your podcasts. Speaker 4 (1:09) The G7 reaches for the emergency fuel tap to bring down the price of the pump. This Speaker 7 (1:14) is just taking a biscuit. Too high for me. It's really bad. Sometimes it's not worth it with these prices. Speaker 4 (1:20) It's World Business Report from the BBC World Service. Speaker 4 (1:25) I'm Liana Byrne. The G7 has agreed to release millions of barrels from emergency reserves in an effort to bring fuel prices down. But will it be enough to take the heat out of the diesel market? Nike admits it has significant work to do in China as sales there slump. And the Italian homes on sale for just one euro. But how much does that bargain really cost? Speaker 4 (1:53) Diesel prices have been on the up and up and it's hitting drivers' pockets. Speaker 5 (1:58) Before you used to spend like £15, now it's almost like double and it's no good, you know. Speaker 1 (2:05) Every day you think about, have I got enough fuel? Where am I going to find reasonably priced fuel? Speaker 3 (2:12) I'm going to have to sell my car. I can't afford to keep this car, so I'm going to have to get something a bit more economical. Speaker 4 (2:18) President Donald Trump had been threatening to restrict US diesel exports in an effort to bring down prices at home, while also pressing Europe, which relies heavily on American supplies to release more fuel from its own reserves. And now G7 countries have agreed to do just that. They'll release 100 million barrels of crude oil and diesel from strategic stockpiles over the next four months, with a substantial amount of diesel due to be released in the first 20 days. French President Emmanuel Macron. Speaker 3 (2:53) This Speaker 1 (2:54) joint decision and this unity should bring prices down. The volumes that are also being released will smooth the functioning of the market and push prices down. And so normally, regardless of any events that might happen again, all of this is moving in the right direction. We have all jointly committed to releasing these strategic reserves in the proportions I mentioned, with priority given to diesel. And we have all committed to ensuring that there will be no export bans. President Trump, in particular, was very clear on this point. And I think that this is very positive, and it increases coordination between the various stakeholders. Speaker 4 (3:33) Now, of course, fuel prices have risen sharply since the start of the US and Israeli war with Iran. President Trump welcomed the agreement on social media, saying Europe had agreed to release what he called a massive amount of its diesel stocks, with the process beginning immediately. Here's President's Economic Advisor, Kevin Hassett. Speaker 3 (3:52) We've had conversations with our European friends. The president is talking to our allies about these matters and we expect that there's lots of room for positive news. The Europeans have a different strategic reserve than the US. Ours is crude and theirs is refined product. And they have a massive, massive amount of refined product, especially diesel. And so we think that they have room probably to help the world economy right now. Speaker 4 (4:21) The 100 million barrels will be a mixture of crude oil and diesel, although the exact split hasn't been announced. Oil prices initially fell on the news. Brent crude briefly dropped below $100 a barrel before recovering to around $102. Before the war with Iran began, it had been trading at roughly $73. With me now is Tom Closa, Chief Energy Advisor at Gulf Oil. Tom, hello. Speaker 7 (4:46) Hi, nice to join you today. Speaker 4 (4:48) It's great to have you, Tom. So just give us the context of this. How significant is the release of that crude and diesel when the market is so tight? Speaker 7 (4:58) I think it'll help for October. But in reality, it's pretty underwhelming. I mean, if you divide the numbers up and you go through the arithmetic, it might mean another 415,000 barrels a day of diesel being released. The world uses 30 million barrels a day. And so, you know, it's not really that much. And when you compare it to what was lost from Russia, you know, Russia was typically exporting 800,000 barrels a day not that long ago. So it's not an incredible or a massive sum, as though some of the people in the political sphere have mentioned. Speaker 4 (5:36) Now, why is it diesel that has the particular problem here? Speaker 7 (5:40) Well, diesel is the highest used product across the globe. And if you think about emerging economies, what do they need first? They need diesel to power agriculture, industry, metals, you name it. You know, in the United States, it's used basically for transportation. But around the world, it can really fire up some of the emerging economies. And the problem is drone attacks in Russia, in the Persian Gulf. and in the Red Sea have knocked out, you know, somewhere on the order of 7 million barrels a day, or about 7 % of US global refining capacity. And of that global refining capacity, probably 2 million barrels a day or more of diesel production has been lost for the moment. Speaker 4 (6:23) Now, Tom, you made the point that it's not a huge amount, but... Could it at all make its way through to what businesses and motorists are actually paying? Because these are prices they did fall, didn't they? Speaker 7 (6:35) Yeah, and I think they're going to fall this month. But I don't think we're going to go back to anything approaching typical levels, which is to say that I think October numbers this year will be the highest of any October on record. You know, one of the things we have to consider here is what exactly are strategic inventories in Europe? You don't have underground salt domes like we had for crude oil. And I know Kevin Hassett talked about massive reserves, but it may just be selling oil on the balance sheet from one pocket and it's going in another. It's not clear whether there's going to be a lot more product on the market