Nike’s sales are in a funk. It’s working off a Jordan hangover.

A year ago, Nike Chief Executive John Donahoe celebrated growing the sneaker giant’s Air Force 1, Air Jordan 1 and Dunk into the three largest multibillion–dollar footwear franchises in industry history. Sales of the models were strong and paved the way for the sneaker giant to report $51 billion in sales.

But Nike oversold them and diluted their cool in the process. The company is now aggressively reducing supply of those franchises to save its most iconic sneakers. It is still making more of them than it can sell.

Sneakers that just two years ago could easily be flipped for a profit on resale platforms such as StockX and GOAT are no longer selling out in seconds on Nike’s SNKRS app. The sneaker giant is selling some of its limited-edition releases at discounted prices on its website. The shoes are also appearing on the shelves of retail stores such as Foot Locker, which in the past didn’t sell these limited-edition kicks.

“They’re digging themselves a hole because they put out too much stuff that people don’t want," said sneaker reseller Anthony Treviso, who runs the popular sneaker-information service SiteSupply. “They’re not gauging demand correctly, and it’s causing more releases to sit," Treviso said.

Nike declined to comment. The company on Tuesday is expected to report a 10% decline in sales for the quarter ended Aug. 30, compared with the same period last year.

The sales slump stems in part from a reduction in the number of releases of limited-edition sneakers. Making matters worse: Despite an effort to reduce the number of limited-edition releases, demand for new models remains low, and the launches are still underperforming on Nike’s apps and website, executives warned in June.

Nike’s limited-run Air Jordan sneakers are some of its most profitable products because they can sell for up to $200. Nike made about $7 billion in sales of Jordan brand products in its last fiscal year; footwear accounted for most of those sales.

Investors said the company Tuesday could further lower its sales forecasts for the year. Nike adjusted its sales outlook for the current fiscal year in June, saying it expected a sales decline of up to 6%.

“We have work to do, but we’re on it," Donahoe said during a call with analysts in June.

Donahoe is stepping down as CEO on Oct. 14. Nike veteran Elliott Hill will take the helm to lead the turnaround. Hill was part of Nike’s leadership team when the company initiated a similar marketplace reduction in 2017, and is expected to lean on that experience to navigate the challenges ahead.

This time, the landscape is different as more brands compete for shoppers in both the running and lifestyle categories. People of all ages are embracing shoes such as the Adidas Samba, the New Balance 990 and the Asics Gel-Kayano. And today, analysts say Nike doesn’t have the kind of groundbreaking product innovation that it did in 2017, when the company released its first super shoe, the Vaporfly.

In a video shared with staff recently, Hill asked employees to rally together and “move with speed and a sense of urgency."

Reselling woes

Nike dominates the resale market but keeps losing market share to competitors. Sales of Nike and Jordan sneakers on StockX fell 21% in the first half of 2024, compared with the same period last year, the online marketplace reported in August. Trades of rivals Asics and Adidas grew about 600% and 90%, respectively, StockX said.

Donahoe said in an April interview that Nike ramped up production in 2020 to meet demand on its SNKRS app because it was meeting less than 5% of the demand for some of the releases. He said Nike’s goal was to meet about 20% of the demand for limited-edition models.

Nike released more than 700 different Jordan brand sneakers in 2022 and 2023, respectively—more than it had ever released in a single year. This year, the company is paring back the releases by about 35%, according to a Wall Street Journal analysis of GOAT data.

Nike is making a push to accelerate its innovation pipeline, trying to bring newer products to market sooner, executives say. Earlier this year, the company released the newest version of its Air franchise, the Air Max DN.

In recent months, only about 20% of the shoe’s stock has sold out on Nike’s website, according to an analysis from investment bank BMO Capital Markets. Some color variations of the sneaker are sold at a discount, signaling that it hasn’t caught on.

Write to Inti Pacheco at inti.pacheco@wsj.com